UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 2, 2013
Federal National Mortgage Association
(Exact name of registrant as specified in its charter)
Federally chartered corporation | 000-50231 | 52-0883107 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) | ||
3900 Wisconsin Avenue, NW Washington, DC | 20016 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: 202-752-7000
(Former Name or Former Address, if Changed Since Last Report): ______________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
The information in this report, including information in the exhibits submitted herewith, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to Fannie Mae (formally known as the Federal National Mortgage Association), except to the extent, if any, expressly incorporated by specific reference in that document.
Item 2.02 Results of Operations and Financial Condition.
On April 2, 2013, Fannie Mae filed its annual report on Form 10-K for the year ended December 31, 2012 and issued a news release reporting its financial results for the periods covered by the Form 10-K. The news release, a copy of which is furnished as Exhibit 99.1 to this report, is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On April 2, 2013, Fannie Mae posted to its Web site a 2012 Credit Supplement presentation consisting primarily of information about Fannie Mae’s guaranty book of business. The presentation, a copy of which is furnished as Exhibit 99.2 to this report, is incorporated herein by reference. Fannie Mae’s Web site address is www.fanniemae.com. Information appearing on the company’s Web site is not incorporated into this report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The exhibit index filed herewith is incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FEDERAL NATIONAL MORTGAGE ASSOCIATION | ||
By | /s/ Susan R. McFarland | |
Susan R. McFarland | ||
Executive Vice President and Chief Financial Officer | ||
Date: April 2, 2013
EXHIBIT INDEX
The following exhibits are submitted herewith:
Exhibit Number | Description of Exhibit | ||
99.1 | News release, dated April 2, 2013 | ||
99.2 | 2012 Credit Supplement presentation, dated April 2, 2013 | ||
Resource Center: 1-800-732-6643
Exhibit 99.1
Contact: Pete Bakel
202-752-2034
Date: April 2, 2013
Fannie Mae Reports Largest Net Income in Company History;
$17.2 Billion for 2012 and $7.6 Billion for Fourth Quarter 2012
Fannie Mae Paid Taxpayers $11.6 Billion in Dividends in 2012
• | Significant improvement in credit results and growing revenue resulted in annual net income of $17.2 billion and $7.6 billion for the fourth quarter, the largest annual and quarterly net income in the company’s history. |
• | Fannie Mae has paid taxpayers $35.6 billion in dividends since 2008; company expects to remain profitable for the foreseeable future. |
• | Fannie Mae has funded the mortgage market with approximately $3.3 trillion in liquidity since 2009, enabling families to buy, refinance, or rent a home. |
WASHINGTON, DC - Fannie Mae (FNMA/OTC) today reported annual net income of $17.2 billion for 2012 and quarterly net income of $7.6 billion for the fourth quarter of 2012, compared with a net loss of $16.9 billion for 2011. The improvement in the company’s full-year and quarterly net income was due primarily to improved credit results driven by a decline in serious delinquency rates, an increase in home prices, higher sales prices on Fannie Mae-owned properties, and the company’s resolution agreements with Bank of America.
As a result of actions to strengthen its financial performance and continued improvement in the housing market, Fannie Mae’s financial results improved significantly in 2012 and the company expects to remain profitable for the foreseeable future. Based on analysis of all relevant factors, Fannie Mae determined that the valuation allowance on the company’s deferred tax assets was still appropriate as of December 31, 2012. The valuation allowance as of December 31, 2012 was $58.9 billion.
“Our financial results improved significantly in 2012 and we expect our earnings to remain strong over the next few years,” said Timothy J. Mayopoulos, president and chief executive officer. “We have taken a number of actions since 2009 to manage our legacy book of business, build a healthy new book of business with responsible underwriting standards, price appropriately for risk, and reduce uncertainty by resolving outstanding issues. These actions have helped to strengthen our financial performance and to support the housing recovery by enabling families to buy, refinance, or rent a home even during the housing crisis.”
“Solid business fundamentals such as improving performance of our book of business and improvements in the housing market led us to report the largest annual and quarterly net income in the company’s history,” said Susan McFarland, executive vice president and chief financial officer. “We expect to remain profitable for the foreseeable future and return significant value to taxpayers.”
Fourth Quarter and Full Year 2012 Results | 1 |
Fannie Mae reported comprehensive income of $18.8 billion for the full year of 2012 and $7.8 billion for the fourth quarter of 2012. For the full year of 2012, Fannie Mae paid $11.6 billion in dividends to Treasury under the senior preferred stock purchase agreement between Fannie Mae and Treasury. As a result of the company’s positive net worth as of December 31, 2012, the company did not request a draw from Treasury for the fourth quarter of 2012.
In August 2012, the terms governing the company’s dividend obligations on the senior preferred stock were amended. The amended senior preferred stock purchase agreement does not allow the company to build a capital reserve. Beginning in 2013, the required senior preferred stock dividends each quarter will equal the amount, if any, by which the company’s net worth as of the end of the preceding quarter exceeds an applicable capital reserve amount. The applicable capital reserve amount will be $3.0 billion for each quarter of 2013 and will be reduced by $600 million annually until it reaches zero in 2018. With Fannie Mae’s payment of a $4.2 billion dividend in the first quarter of 2013, the company has paid $35.6 billion in dividends to Treasury.
(1) | Treasury draws do not include the initial $1.0 billion liquidation preference of Fannie Mae’s senior preferred stock, for which Fannie Mae did not receive any cash proceeds. The liquidation preference on Fannie Mae’s senior preferred stock is not reduced by the payment of dividends to Treasury. |
Fannie Mae has operated under the conservatorship of the Federal Housing Finance Agency (“FHFA”) since September 6, 2008. The funding the company has received under the senior preferred stock purchase agreement with the U.S. Treasury has provided the company with the capital and liquidity needed to maintain its ability to fulfill its mission of providing liquidity and support to the nation’s housing finance markets and to avoid a trigger of mandatory receivership under the Federal Housing Finance Regulatory Reform Act of 2008. Through March 31, 2013, Fannie Mae has requested cumulative draws totaling $116.1 billion. Under the senior preferred stock purchase agreement, the payment of dividends cannot be used to offset prior Treasury draws. Accordingly, while Fannie Mae has paid $35.6 billion in dividends to Treasury, Treasury still maintains a liquidation preference of $117.1 billion on the company’s senior preferred stock.
Beginning January 1, 2013, the amount of remaining funding available to Fannie Mae under the senior preferred stock purchase agreement with Treasury is $117.6 billion. This reflects the remaining funding available as of December 31, 2009 of $124.8 billion less the company’s net worth of $7.2 billion at December 31, 2012.
Fourth Quarter and Full Year 2012 Results | 2 |
Fannie Mae is not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment under the senior preferred stock purchase agreement. The limited circumstances under which Treasury’s funding commitment will terminate are described in “Business—Conservatorship and Treasury Agreements” in the company’s annual report on Form 10-K for the year ended December 31, 2012.
DEFERRED TAX ASSET VALUATION ALLOWANCE
Each quarter, Fannie Mae evaluates the recoverability of its deferred tax assets, weighing a complex set of factors. The company is required to establish or maintain a valuation allowance for these assets if it determines that it is more likely than not that some or all of the deferred tax assets will not be realized. Fannie Mae established a valuation allowance against its deferred tax assets in 2008.
In evaluating the recoverability of Fannie Mae’s deferred tax assets, as of December 31, 2012, the company again determined that the factors in favor of maintaining the allowance outweighed the factors in favor of releasing it. Therefore, Fannie Mae did not release any of its valuation allowance as of December 31, 2012. The valuation allowance as of December 31, 2012 was $58.9 billion.
If and when Fannie Mae does release the valuation allowance on its deferred tax assets, it will be included as income in that period and will result in a corresponding increase in the company’s net worth as of the end of that period. Accordingly, Fannie Mae expects to pay Treasury a significant dividend in the quarter following a release of the valuation allowance on the company’s deferred tax assets. Although Fannie Mae has not completed its analysis, the company believes that, after considering all relevant factors, it may release the valuation allowance on its deferred tax assets as early as the first quarter of 2013.
For information on the release of the deferred tax asset valuation allowance, please refer to the company’s annual report on Form 10-K for the year ended December 31, 2012.
RESOLUTION AGREEMENTS WITH BANK OF AMERICA
Fannie Mae’s net income for 2012 was impacted by its resolution agreements with Bank of America related to repurchase requests and compensatory fees. These agreements led to the recognition of $1.3 billion in pre-tax income for 2012. In addition, the company expects to recognize additional net income in the first quarter of 2013 and in future periods relating to the resolution agreements.
Repurchase Request Resolution Agreement: On January 6, 2013, Fannie Mae entered into a resolution agreement with affiliates of Bank of America Corporation to resolve certain repurchase requests arising from breaches of selling representations and warranties. The resolution agreement resolved the company’s outstanding and expected future repurchase requests arising from breaches of selling representations and warranties on specified single-family loans delivered to Fannie Mae by Bank of America and Countrywide that were originated between January 1, 2000 and December 31, 2008. The resolution agreement included, among other things, the following components:
• | Bank of America made a cash payment to Fannie Mae of $3.6 billion in January 2013 related to repurchase requests; |
• | Bank of America repurchased approximately 29,500 loans from Fannie Mae in January 2013 for an aggregate repurchase price of $6.6 billion, subject to a reconciliation process; and |
• | Bank of America made an initial cash payment of $518 million in January 2013 related to mortgage insurance claims. |
Fourth Quarter and Full Year 2012 Results | 3 |
The resolution agreement addressed $11.3 billion of unpaid principal balance, or 97 percent, of Fannie Mae’s outstanding repurchase requests made to Bank of America as of December 31, 2012. Accordingly, the amount of Fannie Mae’s outstanding repurchase requests will decrease substantially in the three months ending March 31, 2013 as outstanding repurchase requests to Bank of America represented 73 percent of Fannie Mae’s total repurchase requests outstanding as of December 31, 2012.
Compensatory Fee Resolution Agreement: Also on January 6, 2013, Fannie Mae and Bank of America entered into a compensatory fee agreement to resolve outstanding and certain future compensatory fees owed by Bank of America due to servicing delays. Bank of America made an initial payment to Fannie Mae of $1.3 billion in January 2013. Subsequent to the initial payment, Fannie Mae and Bank of America will complete a loan review process in 2013 as specified in the compensatory fee agreement to mutually determine the final amount of compensatory fees owed. For the year ended December 31, 2012, Fannie Mae recognized income of $203 million in “Foreclosed property (income) expense” in its consolidated statement of operations and comprehensive income (loss) as a result of the compensatory fee agreement. Any remaining amount will be recognized in 2013 once Fannie Mae has completed a sufficient portion of the loan review process to determine the final amount of income that will be received under the terms of the agreement.
For information on the resolution agreements with Bank of America, please refer to the company’s annual report on Form 10-K for the year ended December 31, 2012.
PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET
Fannie Mae provided approximately $3.3 trillion in liquidity to the mortgage market from January 1, 2009 through December 31, 2012 through its purchases and guarantees of loans, which enabled borrowers to complete 9.7 million mortgage refinancings and 2.7 million home purchases, and provided financing for 1.7 million units of multifamily housing.
The company remained the largest single issuer of single-family mortgage-related securities in the secondary market in the fourth quarter of 2012, with an estimated market share of new single-family mortgage-related securities issuances of 48 percent, compared with 54 percent in the fourth quarter of 2011 and 49 percent for all of 2012. Fannie Mae also remained a constant source of liquidity in the multifamily market. As of December 31, 2012, the company owned or guaranteed approximately 22 percent of the total outstanding debt on multifamily properties.
Fourth Quarter and Full Year 2012 Results | 4 |
HELPING TO BUILD A NEW HOUSING FINANCE SYSTEM
In addition to continuing to provide liquidity and support to the mortgage market, Fannie Mae has devoted significant resources toward helping to build a new housing finance system for the future, primarily through pursuing the strategic goals identified by its conservator, FHFA. These strategic goals are: build a new infrastructure for the secondary mortgage market; gradually contract the company’s dominant presence in the marketplace while simplifying and shrinking its operations; and maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
CREDIT QUALITY
New Single-Family Book of Business: Fannie Mae is setting responsible credit standards to protect homeowners and taxpayers, while making it possible for families to purchase, refinance, or rent a home. Since 2009, Fannie Mae has seen the effect of the actions it took, beginning in 2008, to significantly strengthen its underwriting and eligibility standards and change its pricing to promote sustainable homeownership and stability in the housing market. As of December 31, 2012, 66 percent of Fannie Mae’s single-family guaranty book of business consisted of loans it had purchased or guaranteed since the beginning of 2009. While Fannie Mae does not yet know how the single-family loans the company has acquired since January 1, 2009 will ultimately perform, given their strong credit risk profile and based on their performance so far, the company expects that these loans, in the aggregate, will be profitable over their lifetime, meaning the company’s fee income on these loans will exceed the company’s credit losses and administrative costs for them.
Fourth Quarter and Full Year 2012 Results | 5 |
Single-family conventional loans acquired by Fannie Mae for the full year of 2012 had a weighted average borrower FICO credit score at origination of 761 and an average original loan-to-value (“LTV”) ratio of 75 percent. The average original LTV ratio for the company’s acquisitions increased for the full year of 2012 because the company acquired more loans with higher LTV ratios in that period than in prior periods as changes to the Home Affordable Refinance Program (“HARP”) were implemented.
Fannie Mae’s Expectations Regarding Future Loss Reserves: The company’s total loss reserves decreased to $62.6 billion as of December 31, 2012 from $76.9 billion as of December 31, 2011. The company expects the trends of improving home prices and declining single-family serious delinquency rates will continue. As a result, the company believes that its total loss reserves peaked as of December 31, 2011. Accordingly, the company does not expect total loss reserves to increase above $76.9 billion in the foreseeable future.
Fannie Mae’s single-family serious delinquency rate has declined each quarter since the first quarter of 2010, and was 3.29 percent as of December 31, 2012, compared with 5.47 percent as of March 31, 2010. This decrease is primarily the result of home retention solutions, foreclosure alternatives, and completed foreclosures, as well as the company’s acquisition of loans with stronger credit profiles since the beginning of 2009.
Fourth Quarter and Full Year 2012 Results | 6 |
HOME RETENTION SOLUTIONS AND FORECLOSURE ALTERNATIVES
To reduce the credit losses Fannie Mae ultimately incurs on its legacy book of business, the company has been focusing its efforts on several strategies, including reducing defaults by offering home retention solutions, such as loan modifications. Fannie Mae completed nearly 40,000 loan modifications during the fourth quarter of 2012 and approximately 163,000 for the full year of 2012, bringing the total number of loan modifications the company has completed since January 1, 2009 to nearly 879,000.
Fannie Mae views foreclosure as a last resort. For homeowners and communities in need, the company offers alternatives to foreclosure. These solutions have enabled 1.2 million homeowners to avoid foreclosure since 2009. In dealing with homeowners in distress, the company first seeks home retention solutions, which enable borrowers to stay in their homes, before turning to foreclosure alternatives. When there is no viable home retention solution or foreclosure alternative that can be applied, the company seeks to move to foreclosure expeditiously in an effort to minimize prolonged delinquencies that can hurt local home values and destabilize communities.
For the Year Ended December 31, | |||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||||||
Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | Number of Loans | ||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||
Home retention solutions: | |||||||||||||||||||||||||||||
Modifications | $ | 30,640 | 163,412 | $ | 42,793 | 213,340 | $ | 82,826 | 403,506 | $ | 18,702 | 98,575 | |||||||||||||||||
Repayment plans and forbearances completed | 3,298 | 23,329 | 5,042 | 35,318 | 4,385 | 31,579 | 2,930 | 22,948 | |||||||||||||||||||||
HomeSaver Advance first-lien loans | — | — | — | — | 688 | 5,191 | 6,057 | 39,199 | |||||||||||||||||||||
33,938 | 186,741 | 47,835 | 248,658 | 87,899 | 440,276 | 27,689 | 160,722 | ||||||||||||||||||||||
Foreclosure alternatives: | |||||||||||||||||||||||||||||
Short sales | 15,916 | 73,528 | 15,412 | 70,275 | 15,899 | 69,634 | 8,457 | 36,968 | |||||||||||||||||||||
Deeds-in-lieu of foreclosure | 2,590 | 15,204 | 1,679 | 9,558 | 1,053 | 5,757 | 491 | 2,649 | |||||||||||||||||||||
18,506 | 88,732 | 17,091 | 79,833 | 16,952 | 75,391 | 8,948 | 39,617 | ||||||||||||||||||||||
Total loan workouts | $ | 52,444 | 275,473 | $ | 64,926 | 328,491 | $ | 104,851 | 515,667 | $ | 36,637 | 200,339 | |||||||||||||||||
Loan workouts as a percentage of single-family guaranty book of business | 1.85 | % | 1.57 | % | 2.29 | % | 1.85 | % | 3.66 | % | 2.87 | % | 1.26 | % | 1.10 | % | |||||||||||||
Fourth Quarter and Full Year 2012 Results | 7 |
REFINANCING INITIATIVES
Through the company’s Refi Plus™ initiative, which provides expanded refinance opportunities for eligible Fannie Mae borrowers and includes HARP, the company acquired approximately 319,000 loans in the fourth quarter of 2012 and approximately 1,117,000 for the full year of 2012. Some borrowers’ monthly payments increased as they took advantage of the ability to refinance through Refi Plus to reduce the term of their loan, to switch from an adjustable-rate mortgage to a fixed-rate mortgage, or to switch from an interest-only mortgage to a fully amortizing mortgage. Even taking these into account, refinancings delivered to Fannie Mae through Refi Plus in the fourth quarter of 2012 reduced borrowers’ monthly mortgage payments by an average of $237.
FORECLOSURES AND REO
Fannie Mae acquired 41,112 single-family REO properties, primarily through foreclosure, in the fourth quarter of 2012, compared with 41,884 in the third quarter of 2012. As of December 31, 2012, the company’s inventory of single-family REO properties was 105,666, compared with 107,225 as of September 30, 2012. The carrying value of the company’s single-family REO was $9.5 billion as of December 31, 2012.
The company’s single-family foreclosure rate was 0.99 percent for the full year of 2012. This reflects the annualized number of single-family properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage of the total number of loans in Fannie Mae’s single-family guaranty book of business.
Fourth Quarter and Full Year 2012 Results | 8 |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Single-family foreclosed properties (number of properties): | ||||||||||||
Beginning of period inventory of single-family foreclosed properties (REO) | 118,528 | 162,489 | 86,155 | |||||||||
Total properties acquired through foreclosure | 174,479 | 199,696 | 262,078 | |||||||||
Dispositions of REO | (187,341 | ) | (243,657 | ) | (185,744 | ) | ||||||
End of period inventory of single-family foreclosed properties (REO) | 105,666 | 118,528 | 162,489 | |||||||||
Carrying value of single-family foreclosed properties (dollars in millions) | $ | 9,505 | $ | 9,692 | $ | 14,955 | ||||||
Single-family foreclosure rate | 0.99 | % | 1.13 | % | 1.46 | % | ||||||
The company provides further discussion of its financial results and condition, credit performance, fair value balance sheets, and other matters in its annual report on Form 10-K for the year ended December 31, 2012, which was filed today with the Securities and Exchange Commission. Further information about the company’s credit performance, the characteristics of its guaranty book of business, the drivers of its credit losses, its foreclosure-prevention efforts, and other measures is contained in the “2012 Credit Supplement” on Fannie Mae’s Web site, www.fanniemae.com.
# # #
In this release and the accompanying Appendix, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements regarding the company's future earnings and financial results, including its profitability; the timing and possibility of a release of the company's valuation allowance on its deferred tax assets; the value the company can deliver to taxpayers; the company's future loss reserves; the profitability of its loans; its future dividend payments to Treasury; its future outstanding repurchase requests and expected actions in connection with its agreements with Bank of America; the trends of improving home prices and declining serious delinquency rates; the impact of the company's actions to reduce credit losses; and the future fair value of the company's trading securities and derivatives. These estimates, forecasts, expectations, and statements are forward looking statements based on the company's current assumptions regarding numerous factors, including future home prices and the future performance of its loans. Actual results, and future projections, could be materially different from what is set forth in the forward-looking statements as a result of home price changes, interest rate changes, unemployment rates, other macroeconomic variables, government policy, credit availability, social behaviors, including increases in the number of underwater borrowers who strategically default on their mortgage loan, the volume of loans it modifies, the nature, volume and effectiveness of its loss mitigation strategies and activities, management of its real estate owned inventory and pursuit of contractual remedies, changes in the fair value of its assets and liabilities, impairments of its assets, the adequacy of its loss reserves, future legislative or regulatory requirements that have a significant impact on the company's business such as a requirement that the company implement a principal forgiveness program, future updates to the company's models relating to loss reserves, including the assumptions used by these models; changes in generally accepted accounting principles, changes to the company's accounting policies, failures by its mortgage seller-servicers to fulfill their repurchase obligations to it, its ability to maintain a positive net worth, effects from activities the company takes to support the mortgage market and help homeowners, the conservatorship and its effect on the company's business, the investment by Treasury and its effect on the company's business, changes in the structure and regulation of the financial services industry, the company's ability to access the debt markets, disruptions in the housing, credit, and stock markets, government investigations and litigation, the performance of the company's servicers, conditions in the foreclosure environment, natural or other disasters, and many other factors, including those discussed in the “Risk Factors” section of and elsewhere in the company's annual report on Form 10-K for the year ended December 31, 2012, and elsewhere in this release.
Fannie Mae provides Web site addresses in its news releases solely for readers’ information. Other content or information appearing on these Web sites is not part of this release.
Fannie Mae enables people to buy, refinance, or rent a home.
Fourth Quarter and Full Year 2012 Results | 9 |
APPENDIX
SUMMARY OF FOURTH QUARTER AND FULL YEAR 2012 RESULTS
Fannie Mae reported net income of $7.6 billion for the fourth quarter of 2012, compared with net income of $1.8 billion for the third quarter of 2012 and a net loss of $2.4 billion for the fourth quarter of 2011. The company reported net income of $17.2 billion for 2012, compared with a net loss of $16.9 billion for 2011. As a result of the company’s positive net worth as of December 31, 2012, which takes into account dividends paid on senior preferred stock held by Treasury, the company will not request a draw for the quarter from Treasury under the senior preferred stock purchase agreement.
(Dollars in millions) | 4Q12 | 3Q12 | Variance | FY 2012 | FY 2011 | Variance | ||||||||||||||||||
Net interest income | $ | 5,559 | $ | 5,317 | $ | 242 | $ | 21,501 | $ | 19,281 | $ | 2,220 | ||||||||||||
Fee and other income | 339 | 378 | (39 | ) | 1,487 | 1,163 | 324 | |||||||||||||||||
Net revenues | 5,898 | 5,695 | 203 | $ | 22,988 | 20,444 | 2,544 | |||||||||||||||||
Investment gains, net | 106 | 134 | (28 | ) | 487 | 506 | (19 | ) | ||||||||||||||||
Net other-than-temporary impairments | (12 | ) | (38 | ) | 26 | (713 | ) | (308 | ) | (405 | ) | |||||||||||||
Fair value gains (losses), net | 209 | (1,020 | ) | 1,229 | (2,977 | ) | (6,621 | ) | 3,644 | |||||||||||||||
Administrative expenses | (648 | ) | (588 | ) | (60 | ) | (2,367 | ) | (2,370 | ) | 3 | |||||||||||||
Credit-related income (expenses) | ||||||||||||||||||||||||
Benefit (provision) for credit losses | 1,890 | (2,079 | ) | 3,969 | 852 | (26,718 | ) | 27,570 | ||||||||||||||||
Foreclosed property income (expense) | 475 | 48 | 427 | 254 | (780 | ) | 1,034 | |||||||||||||||||
Total credit-related income (expenses) | 2,365 | (2,031 | ) | 4,396 | 1,106 | (27,498 | ) | 28,604 | ||||||||||||||||
Other non-interest expenses(1) | (348 | ) | (339 | ) | (9 | ) | (1,304 | ) | (1,098 | ) | (206 | ) | ||||||||||||
Net gains (losses) and income (expenses) | 1,672 | (3,882 | ) | 5,554 | (5,768 | ) | (37,389 | ) | 31,621 | |||||||||||||||
Income (loss) before federal income taxes | 7,570 | 1,813 | 5,757 | 17,220 | (16,945 | ) | 34,165 | |||||||||||||||||
Benefit for federal income taxes | — | — | — | — | 90 | (90 | ) | |||||||||||||||||
Net income (loss) | 7,570 | 1,813 | 5,757 | 17,220 | (16,855 | ) | 34,075 | |||||||||||||||||
Less: Net loss attributable to the noncontrolling interest | — | 8 | (8 | ) | 4 | — | 4 | |||||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | 7,570 | $ | 1,821 | $ | 5,749 | $ | 17,224 | $ | (16,855 | ) | $ | 34,079 | |||||||||||
Total comprehensive income (loss) attributable to Fannie Mae | $ | 7,753 | $ | 2,567 | $ | 5,186 | $ | 18,843 | $ | (16,408 | ) | $ | 35,251 | |||||||||||
Preferred stock dividends | $ | (2,928 | ) | $ | (2,929 | ) | $ | 1 | $ | (11,603 | ) | $ | (9,614 | ) | $ | (1,989 | ) | |||||||
(1) Consists of debt extinguishment losses, net and other expenses.
Net revenues were $5.9 billion for the fourth quarter of 2012, compared with $5.7 billion for the third quarter of 2012. Net interest income was $5.6 billion, compared with $5.3 billion for the third quarter of 2012. The increase in net interest income compared with the third quarter of 2012 was driven by an increase in income from guaranty fees and accelerated amortization income driven by the high volume of prepayments. The increase was partially offset by lower net interest income from portfolio assets due to a decline in the company’s retained portfolio. For the year, net revenues were $23.0 billion, up 12.4 percent from $20.4 billion in 2011.
Fourth Quarter and Full Year 2012 Results | 10 |
Credit-related income, which consists of recognition of a benefit or provision for credit losses and foreclosed property income, was $2.4 billion in the fourth quarter of 2012, compared with $2.0 billion in credit-related expense the third quarter of 2012. For the year, credit-related income was $1.1 billion, compared with credit-related expense of $27.5 billion in 2011. The company recorded credit-related income in the fourth quarter and full year of 2012 due largely to an increase in home prices.
Credit losses, which the company defines as net charge-offs plus foreclosed property expense, excluding the effect of certain fair-value losses, were $2.2 billion in the fourth quarter of 2012, compared with $3.5 billion in the third quarter of 2012. For the year, credit losses were $14.6 billion compared with $18.7 billion in 2011. Credit losses were down in the fourth quarter of 2012 compared with the third quarter of 2012 due primarily to improved sales prices on Fannie Mae-owned properties, a decrease in volume of foreclosure and short sale activity, and the resolution agreement with Bank of America, which contributed to an increase in the amount of recoveries on previously charged-off loans. Credit losses were down year over year due to improvements in home prices, higher sales prices on Fannie Mae-owned properties, and fewer defaults during the year.
Fourth Quarter and Full Year 2012 Results | 11 |
Total loss reserves, which reflect the company’s estimate of the probable losses the company has incurred in its guaranty book of business, including concessions it granted borrowers upon modification of their loans, were $62.6 billion as of December 31, 2012, compared with $66.9 billion as of September 30, 2012 and $76.9 billion as of December 31, 2011. The total loss reserve coverage to total nonperforming loans was 25 percent as of December 31, 2012, compared with 26 percent as of September 30, 2012 and 31 percent as of December 31, 2011.
Net fair value gains were $209 million in the fourth quarter of 2012, compared with net fair value losses of $1.0 billion in the third quarter of 2012. For the year, net fair value losses were $3.0 billion, compared with $6.6 billion in 2011. The company recorded fair value gains in the fourth quarter of 2012 due to lower derivative losses because interest rates increased in the fourth quarter of 2012. The decrease in fair value losses for the full year was driven primarily by lower losses on Fannie Mae’s risk management derivatives as interest rates declined significantly in 2011 compared with a more modest decline in 2012. The estimated fair value of the company’s trading securities and derivatives may fluctuate substantially from period to period because of changes in interest rates, credit spreads, and interest rate volatility, as well as activity related to these financial instruments.
Fourth Quarter and Full Year 2012 Results | 12 |
BUSINESS SEGMENT RESULTS
The business groups running Fannie Mae’s three reporting segments – its Single-Family business, its Multifamily business, and its Capital Markets group – engage in complementary business activities in pursuing the company’s mission of providing liquidity, stability, and affordability to the U.S. housing market. The company’s Single-Family and Multifamily businesses work with Fannie Mae’s lender customers, who deliver mortgage loans that the company purchases and securitizes into Fannie Mae MBS. The Capital Markets group manages the company’s investment activity in mortgage-related assets and other interest-earning non-mortgage investments, funding investments in mortgage-related assets primarily with proceeds received from the issuance of Fannie Mae debt securities in the domestic and international capital markets. The Capital Markets group also provides liquidity to the mortgage market through short-term financing and other activities.
Single-Family business had net income of $4.0 billion in the fourth quarter of 2012, compared with a net loss of $822 million in the third quarter of 2012. For the year, the Single-Family business had net income of $6.3 billion, compared with a net loss of $23.9 billion in 2011. The shift to net income in the fourth quarter from a net loss in the third quarter and to net income in 2012 compared with net loss in 2011 was due primarily to continuing improvement in the company’s credit results. The Single-Family guaranty book of business was $2.83 trillion as of December 31, 2012, compared with $2.85 trillion as of September 30, 2012 and $2.84 trillion as of December 31, 2011. Single-Family guaranty fee income was $2.3 billion in the fourth quarter of 2012 and $2.0 billion in the third quarter of 2012. For the year, Single-Family guaranty fee income was $8.2 billion, compared with $7.5 billion in 2011.
Multifamily had net income of $447 million in the fourth quarter of 2012, compared with $427 million in the third quarter of 2012. For the year, Multifamily had net income of $1.5 billion, compared with $583 million in 2011. The Multifamily guaranty book of business was $206.2 billion as of December 31, 2012, compared with $202.2 billion as of September 30, 2012 and $195.2 billion as of December 31, 2011. Multifamily recorded credit-related expense of $54 million in the fourth quarter of 2012, compared with credit-related income of $99 million in the third quarter of 2012. Multifamily recorded credit-related income of $187 million in 2012, compared with credit-related expense of $280 million in 2011. Multifamily guaranty fee income was $280 million for the fourth quarter of 2012 and $265 million for the third quarter of 2012. Multifamily guaranty fee income was $1.0 billion for 2012 and $884 million for 2011.
Capital Markets group had net income of $4.3 billion in the fourth quarter of 2012, compared with $4.1 billion in the third quarter of 2012. The group had net income of $14.2 billion for the year, compared with $9.0 billion for 2011. Capital Markets’ net interest income for the fourth quarter of 2012 was $3.0 billion, compared with $3.2 billion for the third quarter of 2012. The group had net interest income of $13.2 billion for the year, compared with $13.9 billion for 2011. Fair value gains for the fourth quarter of 2012 were $211 million, compared with fair value losses of $1.0 billion in the third quarter of 2012. Fair value losses for the year were $3.0 billion compared with fair value losses of $6.6 billion for 2011. The Capital Markets mortgage investment portfolio balance decreased to $633.1 billion as of December 31, 2012, compared with $708.4 billion as of December 31, 2011, resulting from purchases of $288.3 billion, liquidations of $139.5 billion, and sales of $224.2 billion during the year.
Fourth Quarter and Full Year 2012 Results | 13 |
($ in millions) | 4Q12 | 3Q12 | Variance | 2012 | 2011 | Variance | ||||||||||||||||||
Single-Family Segment: | ||||||||||||||||||||||||
Guaranty fee income | $ | 2,256 | $ | 2,014 | $ | 242 | $ | 8,151 | $ | 7,507 | $ | 644 | ||||||||||||
Credit-related income (expenses) | 2,419 | (2,130 | ) | 4,549 | 919 | (27,218 | ) | 28,137 | ||||||||||||||||
Other | (649 | ) | (706 | ) | 57 | (2,780 | ) | (4,230 | ) | 1,450 | ||||||||||||||
Net income (loss) | $ | 4,026 | $ | (822 | ) | $ | 4,848 | $ | 6,290 | $ | (23,941 | ) | $ | 30,231 | ||||||||||
Multifamily Segment: | ||||||||||||||||||||||||
Guaranty fee income | $ | 280 | $ | 265 | $ | 15 | $ | 1,040 | $ | 884 | $ | 156 | ||||||||||||
Credit-related (expenses) income | (54 | ) | 99 | (153 | ) | 187 | (280 | ) | 467 | |||||||||||||||
Other | 221 | 63 | 158 | 284 | (21 | ) | 305 | |||||||||||||||||
Net income | $ | 447 | $ | 427 | $ | 20 | $ | 1,511 | $ | 583 | $ | 928 | ||||||||||||
Capital Markets Segment: | ||||||||||||||||||||||||
Net interest income | $ | 3,010 | $ | 3,247 | $ | (237 | ) | $ | 13,241 | $ | 13,920 | $ | (679 | ) | ||||||||||
Investment gains, net | 1,551 | 2,201 | (650 | ) | 6,217 | 3,711 | 2,506 | |||||||||||||||||
Fair value gains (losses), net | 211 | (961 | ) | 1,172 | (3,041 | ) | (6,596 | ) | 3,555 | |||||||||||||||
Other | (470 | ) | (365 | ) | (105 | ) | (2,216 | ) | (2,036 | ) | (180 | ) | ||||||||||||
Net income | $ | 4,302 | $ | 4,122 | $ | 180 | $ | 14,201 | $ | 8,999 | $ | 5,202 | ||||||||||||
Fourth Quarter and Full Year 2012 Results | 14 |
ANNEX I
FANNIE MAE
(In conservatorship)
Consolidated Balance Sheets
(Dollars in millions, except share amounts)
As of December 31, | |||||||||||
2012 | 2011 | ||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 21,117 | $ | 17,539 | |||||||
Restricted cash (includes $61,976 and $45,900, respectively, related to consolidated trusts) | 67,919 | 50,797 | |||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 32,500 | 46,000 | |||||||||
Investments in securities: | |||||||||||
Trading, at fair value | 40,695 | 74,198 | |||||||||
Available-for-sale, at fair value (includes $935 and $1,191, respectively, related to consolidated trusts) | 63,181 | 77,582 | |||||||||
Total investments in securities | 103,876 | 151,780 | |||||||||
Mortgage loans: | |||||||||||
Loans held for sale, at lower of cost or fair value (includes $72 and $66, respectively, related to consolidated trusts) | 464 | 311 | |||||||||
Loans held for investment, at amortized cost: | |||||||||||
Of Fannie Mae | 355,544 | 380,134 | |||||||||
Of consolidated trusts (includes $10,800 and $3,611 respectively, at fair value and loans pledged as collateral that may be sold or repledged of $943 and $798, respectively) | 2,652,193 | 2,590,332 | |||||||||
Total loans held for investment | 3,007,737 | 2,970,466 | |||||||||
Allowance for loan losses | (58,795 | ) | (72,156 | ) | |||||||
Total loans held for investment, net of allowance | 2,948,942 | 2,898,310 | |||||||||
Total mortgage loans | 2,949,406 | 2,898,621 | |||||||||
Accrued interest receivable, net (includes $7,567 and $8,466, respectively, related to consolidated trusts) | 9,176 | 10,000 | |||||||||
Acquired property, net | 10,489 | 11,373 | |||||||||
Other assets (includes cash pledged as collateral of $1,222 and $1,109, respectively) | 27,939 | 25,374 | |||||||||
Total assets | $ | 3,222,422 | $ | 3,211,484 | |||||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||
Liabilities: | |||||||||||
Accrued interest payable (includes $8,645 and $9,302, respectively, related to consolidated trusts) | $ | 11,303 | $ | 12,648 | |||||||
Debt: | |||||||||||
Of Fannie Mae (includes $793 and $838, respectively, at fair value) | 615,864 | 732,444 | |||||||||
Of consolidated trusts (includes $11,647 and $3,939, respectively, at fair value) | 2,573,653 | 2,457,428 | |||||||||
Other liabilities (includes $1,059 and $629, respectively, related to consolidated trusts) | 14,378 | 13,535 | |||||||||
Total liabilities | 3,215,198 | 3,216,055 | |||||||||
Commitments and contingencies (Note 18) | — | — | |||||||||
Fannie Mae stockholders’ equity (deficit): | |||||||||||
Senior preferred stock, 1,000,000 shares issued and outstanding | 117,149 | 112,578 | |||||||||
Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding | 19,130 | 19,130 | |||||||||
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued, 1,158,077,970 and 1,157,767,400 shares outstanding, respectively | 687 | 687 | |||||||||
Accumulated deficit | (122,766 | ) | (128,381 | ) | |||||||
Accumulated other comprehensive income (loss) | 384 | (1,235 | ) | ||||||||
Treasury stock, at cost, 150,684,733 and 150,995,303 shares, respectively | (7,401 | ) | (7,403 | ) | |||||||
Total Fannie Mae stockholders’ equity (deficit) | 7,183 | (4,624 | ) | ||||||||
Noncontrolling interest | 41 | 53 | |||||||||
Total equity (deficit) | 7,224 | (4,571 | ) | ||||||||
Total liabilities and equity (deficit) | $ | 3,222,422 | $ | 3,211,484 | |||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2012 Results | 15 |
FANNIE MAE
(In conservatorship)
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars and shares in millions, except per share amounts)
For the Year Ended December 31, | ||||||||||||||||||
2012 | 2011 | 2010 | ||||||||||||||||
Interest income: | ||||||||||||||||||
Trading securities | $ | 989 | $ | 1,087 | $ | 1,251 | ||||||||||||
Available-for-sale securities | 3,299 | 3,277 | 5,290 | |||||||||||||||
Mortgage loans (includes $110,451, $123,633, and $132,591, respectively, related to consolidated trusts) | 124,706 | 138,462 | 147,583 | |||||||||||||||
Other | 196 | 117 | 146 | |||||||||||||||
Total interest income | 129,190 | 142,943 | 154,270 | |||||||||||||||
Interest expense: | ||||||||||||||||||
Short-term debt | 152 | 310 | 631 | |||||||||||||||
Long-term debt (includes $95,612, $108,641, and $118,373, respectively, related to consolidated trusts) | 107,537 | 123,352 | 137,230 | |||||||||||||||
Total interest expense | 107,689 | 123,662 | 137,861 | |||||||||||||||
Net interest income | 21,501 | 19,281 | 16,409 | |||||||||||||||
Benefit (provision) for credit losses | 852 | (26,718 | ) | (24,896 | ) | |||||||||||||
Net interest income (loss) after benefit (provision) for credit losses | 22,353 | (7,437 | ) | (8,487 | ) | |||||||||||||
Investment gains, net | 487 | 506 | 346 | |||||||||||||||
Other-than-temporary impairments | (311 | ) | (614 | ) | (694 | ) | ||||||||||||
Noncredit portion of other-than-temporary impairments recognized in other comprehensive income (loss) | (402 | ) | 306 | (28 | ) | |||||||||||||
Net other-than-temporary impairments | (713 | ) | (308 | ) | (722 | ) | ||||||||||||
Fair value losses, net | (2,977 | ) | (6,621 | ) | (511 | ) | ||||||||||||
Debt extinguishment losses, net | (244 | ) | (232 | ) | (568 | ) | ||||||||||||
Fee and other income | 1,487 | 1,163 | 1,084 | |||||||||||||||
Non-interest loss | (1,960 | ) | (5,492 | ) | (371 | ) | ||||||||||||
Administrative expenses: | ||||||||||||||||||
Salaries and employee benefits | 1,195 | 1,236 | 1,277 | |||||||||||||||
Professional services | 766 | 736 | 942 | |||||||||||||||
Occupancy expenses | 188 | 179 | 170 | |||||||||||||||
Other administrative expenses | 218 | 219 | 208 | |||||||||||||||
Total administrative expenses | 2,367 | 2,370 | 2,597 | |||||||||||||||
Foreclosed property (income) expense | (254 | ) | 780 | 1,718 | ||||||||||||||
Other expenses | 1,060 | 866 | 927 | |||||||||||||||
Total expenses | 3,173 | 4,016 | 5,242 | |||||||||||||||
Income (loss) before federal income taxes | 17,220 | (16,945 | ) | (14,100 | ) | |||||||||||||
Benefit for federal income taxes | — | 90 | 82 | |||||||||||||||
Net income (loss) | 17,220 | (16,855 | ) | (14,018 | ) | |||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||
Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes | 1,735 | 622 | 3,504 | |||||||||||||||
Other | (116 | ) | (175 | ) | (60 | ) | ||||||||||||
Total other comprehensive income | 1,619 | 447 | 3,444 | |||||||||||||||
Total comprehensive income (loss) | 18,839 | (16,408 | ) | (10,574 | ) | |||||||||||||
Less: Comprehensive loss attributable to noncontrolling interest | 4 | — | 4 | |||||||||||||||
Total comprehensive income (loss) attributable to Fannie Mae | $ | 18,843 | $ | (16,408 | ) | $ | (10,570 | ) | ||||||||||
Net income (loss) | $ | 17,220 | $ | (16,855 | ) | $ | (14,018 | ) | ||||||||||
Less: Net loss attributable to noncontrolling interest | 4 | — | 4 | |||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | 17,224 | $ | (16,855 | ) | $ | (14,014 | ) | ||||||||||
Preferred stock dividends | (11,603 | ) | (9,614 | ) | (7,704 | ) | ||||||||||||
Undistributed earnings available for distribution to senior preferred stockholder | (4,224 | ) | — | — | ||||||||||||||
Net income (loss) attributable to common stockholders (Note 11) | $ | 1,397 | $ | (26,469 | ) | $ | (21,718 | ) | ||||||||||
Earnings (loss) per share: | ||||||||||||||||||
Basic | $ | 0.24 | $ | (4.61 | ) | $ | (3.81 | ) | ||||||||||
Diluted | 0.24 | (4.61 | ) | (3.81 | ) | |||||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||
Basic | 5,762 | 5,737 | 5,694 | |||||||||||||||
Diluted | 5,893 | 5,737 | 5,694 | |||||||||||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2012 Results | 16 |
FANNIE MAE
(In conservatorship)
Consolidated Statements of Cash Flows
(Dollars in millions)
For the Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | |||||||||
Cash flows provided by (used in) operating activities: | |||||||||||
Net income (loss) | $ | 17,220 | $ | (16,855 | ) | $ | (14,018 | ) | |||
Reconciliation of net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
Amortization of cost basis adjustments | (2,335 | ) | (369 | ) | 126 | ||||||
(Benefit) provision for credit losses | (852 | ) | 26,718 | 24,896 | |||||||
Valuation gains | (1,345 | ) | (408 | ) | (1,289 | ) | |||||
(Gains) losses from partnership investments | (119 | ) | (82 | ) | 74 | ||||||
Current and deferred federal income taxes | 10 | 1,044 | 258 | ||||||||
Purchases of loans held for sale | (603 | ) | (737 | ) | (81 | ) | |||||
Proceeds from repayments and sales of loans held for sale | 177 | 68 | 88 | ||||||||
Net change in trading securities, excluding non-cash transfers | 31,972 | (17,048 | ) | (23,612 | ) | ||||||
Payments for foreclosed property expenses | (5,722 | ) | (5,394 | ) | (5,658 | ) | |||||
Other, net | (1,402 | ) | (2,175 | ) | (8,179 | ) | |||||
Net cash provided by (used in) operating activities | 37,001 | (15,238 | ) | (27,395 | ) | ||||||
Cash flows provided by investing activities: | |||||||||||
Purchases of trading securities held for investment | (3,216 | ) | (2,951 | ) | (8,547 | ) | |||||
Proceeds from maturities and paydowns of trading securities held for investment | 3,508 | 2,591 | 2,638 | ||||||||
Proceeds from sales of trading securities held for investment | 3,861 | 1,526 | 21,556 | ||||||||
Purchases of available-for-sale securities | (34 | ) | (192 | ) | (413 | ) | |||||
Proceeds from maturities and paydowns of available-for-sale securities | 12,636 | 13,552 | 17,102 | ||||||||
Proceeds from sales of available-for-sale securities | 1,306 | 3,192 | 7,867 | ||||||||
Purchases of loans held for investment | (210,488 | ) | (78,099 | ) | (86,724 | ) | |||||
Proceeds from repayments of loans held for investment of Fannie Mae | 31,322 | 25,190 | 20,715 | ||||||||
Proceeds from repayments of loans held for investment of consolidated trusts | 797,331 | 544,145 | 574,740 | ||||||||
Net change in restricted cash | (17,122 | ) | 12,881 | (15,025 | ) | ||||||
Advances to lenders | (144,064 | ) | (70,914 | ) | (74,130 | ) | |||||
Proceeds from disposition of acquired property and preforeclosure sales | 38,685 | 47,248 | 39,682 | ||||||||
Net change in federal funds sold and securities purchased under agreements to resell or similar agreements | 13,500 | (34,249 | ) | 41,471 | |||||||
Other, net | 468 | 468 | (753 | ) | |||||||
Net cash provided by investing activities | 527,693 | 464,388 | 540,179 | ||||||||
Cash flows used in financing activities: | |||||||||||
Proceeds from issuance of debt of Fannie Mae | 736,065 | 766,598 | 1,155,993 | ||||||||
Payments to redeem debt of Fannie Mae | (854,111 | ) | (815,838 | ) | (1,146,363 | ) | |||||
Proceeds from issuance of debt of consolidated trusts | 396,513 | 233,516 | 276,575 | ||||||||
Payments to redeem debt of consolidated trusts | (832,537 | ) | (647,695 | ) | (808,502 | ) | |||||
Payments of cash dividends on senior preferred stock to Treasury | (11,608 | ) | (9,613 | ) | (7,706 | ) | |||||
Proceeds from senior preferred stock purchase agreement with Treasury | 4,571 | 23,978 | 27,700 | ||||||||
Other, net | (9 | ) | 146 | 4 | |||||||
Net cash used in financing activities | (561,116 | ) | (448,908 | ) | (502,299 | ) | |||||
Net increase in cash and cash equivalents | 3,578 | 242 | 10,485 | ||||||||
Cash and cash equivalents at beginning of period | 17,539 | 17,297 | 6,812 | ||||||||
Cash and cash equivalents at end of period | $ | 21,117 | $ | 17,539 | $ | 17,297 | |||||
Cash paid during the period for: | |||||||||||
Interest | $ | 119,259 | $ | 128,806 | $ | 140,651 | |||||
Non-cash activities: | |||||||||||
Net mortgage loans acquired by assuming debt | $ | 537,862 | $ | 448,437 | $ | 484,699 | |||||
Net transfers from (to) mortgage loans of Fannie Mae to (from) mortgage loans of consolidated trusts | 165,272 | 33,859 | (121,852 | ) | |||||||
Transfers from advances to lenders to loans held for investment of consolidated trusts | 133,554 | 69,223 | 68,385 | ||||||||
Net transfers from mortgage loans to acquired property | 46,981 | 56,517 | 66,081 | ||||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2012 Results | 17 |
FANNIE MAE
(In conservatorship)
Consolidated Statements of Changes in Equity (Deficit)
(Dollars and shares in millions)
Fannie Mae Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Senior Preferred Stock | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Non Controlling Interest | Total Equity (Deficit) | ||||||||||||||||||||||||||||||||||||
Senior Preferred | Preferred | Common | |||||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2010. | 1 | 580 | 1,113 | 60,900 | $ | 20,348 | $ | 664 | $ | 2,083 | $ | (83,531 | ) | $ | (5,126 | ) | $ | (7,398 | ) | $ | 77 | $ | (11,983 | ) | |||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 9 | 9 | |||||||||||||||||||||||||||||||||
Comprehensive loss: | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (14,014 | ) | — | — | (4 | ) | (14,018 | ) | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | |||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on available-for-sale securities (net of tax of $1,644) | — | — | — | — | — | — | — | — | 3,054 | — | — | 3,054 | |||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net loss (net of tax of $253) | — | — | — | — | — | — | — | — | 469 | — | — | 469 | |||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $10) | — | — | — | — | — | — | — | — | (19 | ) | — | — | (19 | ) | |||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty fee buy-ups | — | — | — | — | — | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (61 | ) | — | — | (61 | ) | |||||||||||||||||||||||||||||||
Total comprehensive loss | (10,574 | ) | |||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (2,265 | ) | (5,441 | ) | — | — | — | (7,706 | ) | ||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 27,700 | — | — | — | — | — | — | — | 27,700 | |||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (3 | ) | 5 | — | (144 | ) | 3 | 141 | — | — | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | 1 | — | — | — | 41 | — | — | (4 | ) | — | 37 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2010 | 1 | 577 | 1,119 | $ | 88,600 | $ | 20,204 | $ | 667 | $ | — | $ | (102,986 | ) | $ | (1,682 | ) | $ | (7,402 | ) | $ | 82 | $ | (2,517 | ) | ||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (29 | ) | (29 | ) | |||||||||||||||||||||||||||||||
Comprehensive loss: | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (16,855 | ) | — | — | — | (16,855 | ) | |||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | |||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on available-for-sale securities (net of tax of $250) | — | — | — | — | — | — | — | — | 465 | — | — | 465 | |||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net loss (net of tax of $99) | — | — | — | — | — | — | — | — | 209 | — | — | 209 | |||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $28) | — | — | — | — | — | — | — | — | (52 | ) | — | — | (52 | ) | |||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (175 | ) | — | — | (175 | ) | |||||||||||||||||||||||||||||||
Total comprehensive loss | (16,408 | ) | |||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (1,072 | ) | (8,541 | ) | — | — | — | (9,613 | ) | ||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 23,978 | — | — | — | — | — | — | — | 23,978 | |||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (21 | ) | 39 | — | (1,074 | ) | 20 | 1,054 | — | — | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | 18 | 1 | — | (1 | ) | — | 18 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2011 | 1 | 556 | 1,158 | $ | 112,578 | $ | 19,130 | $ | 687 | $ | — | $ | (128,381 | ) | $ | (1,235 | ) | $ | (7,403 | ) | $ | 53 | $ | (4,571 | ) | ||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | 17,224 | — | — | (4 | ) | 17,220 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | |||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on available-for-sale securities (net of tax of $702) | — | — | — | — | — | — | — | — | 1,289 | — | — | 1,289 | |||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net income (net of tax of $250) | — | — | — | — | — | — | — | — | 463 | — | — | 463 | |||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net income (net of tax of $9) | — | — | — | — | — | — | — | — | (17 | ) | — | — | (17 | ) | |||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (116 | ) | — | — | (116 | ) | |||||||||||||||||||||||||||||||
Total comprehensive income | 18,839 | ||||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | 1 | (11,609 | ) | — | — | — | (11,608 | ) | |||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 4,571 | — | — | — | — | — | — | — | 4,571 | |||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | (1 | ) | — | — | 2 | — | 1 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2012 | 1 | 556 | 1,158 | $ | 117,149 | $ | 19,130 | $ | 687 | $ | — | $ | (122,766 | ) | $ | 384 | $ | (7,401 | ) | $ | 41 | $ | 7,224 | ||||||||||||||||||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2012 Results | 18 |
April 2, 2013 Fannie Mae 2012 Credit Supplement Exhibit 99.2
1 This presentation includes information about Fannie Mae, including information contained in Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2012, the “2012 Form 10-K.” Some of the terms used in these materials are defined and discussed more fully in the 2012 Form 10-K. These materials should be reviewed together with the 2012 Form 10-K, which is available on the “SEC Filings” page in the “Investor Relations” section of Fannie Mae’s web site at www.fanniemae.com. Some of the information in this presentation is based upon information that we received from third-party sources such as sellers and servicers of mortgage loans. Although we generally consider this information reliable, we do not independently verify all reported information. This presentation includes forward-looking statements relating to future home price changes. Future home price changes may be very different from our expectations as a result of significant inherent uncertainty in the current market environment, including uncertainty about the effect of actions the federal government has taken and may take with respect to tax policies, spending cuts, mortgage finance programs and policies, and housing finance reform; the management of the Federal Reserve’s MBS holdings; the impact of those actions on and changes generally in unemployment and the general economic and interest rate environment; and the impact on the U.S. economy of the economic uncertainty in Europe. The impact of future home price changes on our business, results or financial condition will depend on many other factors. Due to rounding, amounts reported in this presentation may not add to totals indicated (or 100%). A zero indicates less than one half of one percent. A dash indicates a null value.
2 Table of Contents Home Prices Home Price Growth/Decline Rates in the U.S. 3 Home Price Change Peak-to-Current as of 2012 Q4 4 Credit Profile of Fannie Mae Single-Family Loans Credit Characteristics of Single-Family Business Acquisitions 5 Credit Characteristics of Single-Family Business Acquisitions under the Refi Plus Initiative™ 6 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Key Product Features 7 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year 8 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by State 9 Credit Characteristics of Single-Family Conventional Guaranty Book of Business of Alt-A by Origination Year 10 Credit Characteristics of Single-Family Conventional Guaranty Book of Business under the Refi Plus Initiative 11 Serious Delinquency Rates of Single-Family Conventional Guaranty Book of Business by State and Region 12 Workouts of Fannie Mae Single-Family Loans Single-Family Completed Workouts by Type 13 Single-Family Loan Modifications by Monthly Payment Change and Type 14 Re-performance Rates of Modified Single-Family Loans 15 Additional Credit Information for Fannie Mae Single-Family Loans Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year 16 Single-Family Real Estate Owned (REO) in Selected States 17 Single-Family Real Estate Owned (REO) Sales Price / UPB of Mortgage Loans 18 Credit Profile of Fannie Mae Multifamily Loans Multifamily Credit Profile by Loan Attributes 19 Multifamily Credit Profile by Acquisition Year 20 Multifamily Credit Profile 21 Multifamily 2012 Credit Losses by State 22
3 Home Price Growth/Decline Rates in the U.S. Fannie Mae Home Price Index Growth rates are from period-end to period-end. After declining by an estimated 23.8% from their peak in the third quarter of 2006 to the first quarter of 2012, based on our home price index, we estimate that home prices on a national basis increased by 4.7% in 2012 overall, and by 0.5% in the fourth quarter of 2012. Although home price growth may not continue at 2012 rates, we expect that, if current market trends continue, home prices will increase on a national basis overall in 2013. *Estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2013. Including subsequent data may lead to materially different results. 9.8% 7.7% 10.6% 10.7% 14.6% 14.7% -0.3% -8.4% -18.4% -2.5% -3.8% -3.7% 7.3% S&P/Case-Shiller Index 7.0% 6.3% 7.5% 7.6% 10.6% 11.3% 2.8% -3.4% -9.1% -4.8% -4.4% -3.7% 4.7% -15% -10% -5% 0% 5% 10% 15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
4 T X - 0 . 1 % 5 . 3 % M T - 7 . 9 % 0 . 3 % C A -4 2 . 2 % 1 9 . 0 % C O - 6 . 7 % 2 . 6 % N M -1 6 . 0 % 0 . 6 % W Y - 3 . 0 % 0 . 2 % A Z - 4 2 . 5 % 2 . 4 % S D 0 . 0 % 0 . 2 % N V - 5 5 . 8 % 1 . 0 % N D 0 . 0 % 0 . 1 % K S - 3 . 1 % 0 . 5 % O R - 2 5 . 4 % 1 . 7 % N E - 4 . 9 % 0 . 4 % O K - 0 . 5 % 0 . 6 % U T - 1 9 . 0 % 1 . 0 % M N - 1 9 . 4 % 1 . 8 % I D - 2 4 . 5 % 0 . 5 % M O - 1 1 . 8 % 1 . 4 % I A - 0 . 6 % 0 . 7 % W A - 2 5 . 7 % 3 . 5 % A R - 5 . 8 % 0 . 5 % G A - 2 7 . 3 % 2 . 7 % P A - 6 . 6 % 3 . 1 % L A 0 . 0 % 0 . 9 % I L - 2 6 . 0 % 4 . 2 % W I - 1 2 . 6 % 1 . 8 % F L - 4 7 . 2 % 6 . 0 % A L - 1 0 . 7 % 1 . 0 % T N - 8 . 8 % 1 . 3 % N C - 1 1 . 9 % 2 . 5 % K Y - 3 . 3 % 0 . 6 % N Y - 1 1 . 4 % 5 . 6 % M S - 1 0 . 7 % 0 . 4 % I N - 5 . 3 % 1 . 2 % M I - 2 8 . 7 % 2 . 5 % O H - 1 3 . 6 % 2 . 2 % V A - 1 9 . 2 % 3 . 6 % M E - 1 3 . 4 % 0 . 3 % S C - 1 3 . 5 % 1 . 2 % W V -2 . 7 % 0 . 2 % V T - 9 . 5 % 0 . 2 % M D - 2 7 . 7 % 2 . 8 % N H - 2 2 . 5 % 0 . 5 % M A - 1 8 . 3 % 3 . 1 % N J - 2 6 . 2 % 4 . 0 % C T - 2 1 . 4 % 1 . 4 % D E - 1 9 . 9 % 0 . 4 % R I - 3 2 . 3 % 0 . 4 % D C 0 . 0 % 0 . 4 % Home Price Change Peak-to-Current as of 2012 Q4* Mountain -27.0% 8.5% East North Central -18.7% 11.9% West North Central -8.7% 5.0% New England -18.7% 5.8% Middle Atlantic -12.4% 12.7% South Atlantic -28.3% 19.8% East South Central -8.4% 3.4% West South Central -0.3% 7.3% Pacific -36.7% 25.2% United States -20.0% Below -30% -30% to -15% -15% to -5% -5% to 0% 0% and above State Growth Rate State Growth Rate UPB % A K - 2 . 4 % 0 . 2 % H I - 1 7 . 0 % 0 . 8 % Top %: State/Region Home Price Growth Rate percentage from applicable peak in that state/region through December 31, 2012. Bottom %: Percent of Fannie Mae single-family conventional guaranty book of business by unpaid principal balance as of December 31, 2012. Note: Regional home price change percentages are a housing stock unit-weighted average of home price change percentages of states within each region. *Source: Fannie Mae. Estimates based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2013. Including subsequent data may lead to materially different results.
5 Credit Characteristics of Single-Family Business Acquisitions(1) (1) Percentage calculated based on unpaid principal balance of loans at time of acquisition. Single-family business volume refers to both single-family mortgage loans we purchased for our mortgage portfolio and single-family mortgage loans we guarantee into Fannie Mae MBS. Beginning with the third quarter of 2011, we prospectively report loans underlying long-term standby commitments in the period in which the commitment was established, rather than at the time of actual delivery. (2) The increase after 2009 is the result of HARP, which involves the refinance of existing Fannie Mae loans that can have loan-to-value ratios in excess of 100%. (3) Refi Plus and HARP started in April 2009. (4) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. (5) Newly originated Alt-A loans acquired after 2008 consist of the refinance of existing loans under our Refi Plus initiative, which provides expanded refinance opportunities for eligible Fannie Mae borrowers and includes HARP. Acquisition Year 2012 2011 2010 2009 2008 2007 2006 2005 2004 Unpaid Principal Balance (billions) $832.2 $562.3 $595.0 $684.7 $557.2 $643.8 $515.8 $524.2 $568.8 Weighted Average Origination Note Rate 3.78% 4.35% 4.64% 4.93% 6.00% 6.51% 6.45% 5.73% 5.63% Origination Loan-to-Value Ratio <= 60% 25.3% 29.1% 30.3% 32.6% 22.7% 16.7% 18.6% 21.4% 23.1% >60% and <= 70% 14.4% 15.5% 15.9% 17.0% 16.1% 13.5% 15.1% 16.3% 16.2% >70% and <= 80% 34.4% 37.3% 38.5% 39.9% 39.5% 44.7% 49.6% 46.2% 43.1% >80% and <= 90% 9.1% 8.9% 8.6% 6.9% 11.7% 9.1% 6.8% 7.4% 8.2% >90% and <= 100% (2) 8.4% 6.8% 5.2% 3.3% 10.0% 15.8% 9.7% 8.5% 9.3% > 100% (2) 8.3% 2.3% 1.6% 0.4% 0.1% 0.1% 0.2% 0.2% 0.2% Weighted Average Origination Loan-to-Value Ratio 74.5% 69.3% 68.4% 66.8% 72.0% 75.5% 73.4% 72.0% 71.4% Weighted Average Origination Loan-to-Value Ratio Excluding HARP (3) 67.8% 66.6% 65.8% 65.8% FICO Credit Scores (4) 0 to < 620 0.8% 0.5% 0.4% 0.4% 2.8% 6.4% 6.2% 5.4% 5.6% >= 620 and < 660 2.2% 1.8% 1.6% 1.5% 5.7% 11.5% 11.2% 10.7% 11.5% >=660 and < 700 7.2% 7.0% 6.6% 6.5% 13.9% 19.2% 19.6% 18.9% 19.4% >=700 and < 740 15.6% 16.2% 16.1% 17.2% 21.7% 22.6% 23.0% 23.2% 23.9% >=740 74.1% 74.5% 75.1% 74.4% 55.8% 40.1% 39.7% 41.5% 39.2% Missing 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.3% 0.4% Weighted Average FICO Credit Score 761 762 762 761 738 716 716 719 715 Product Distribution Fixed-rate 96.7% 93.5% 93.7% 96.6% 91.7% 90.1% 83.4% 78.7% 78.8% Adjustable-rate 3.3% 6.5% 6.3% 3.4% 8.3% 9.9% 16.6% 21.3% 21.2% Alt-A (5) 0.8% 1.2% 0.9% 0.2% 3.1% 16.7% 21.8% 16.1% 11.9% Subprime 0.3% 0.7% 0.7% 0.0% Interest Only 0.3% 0.7% 1.3% 1.0% 5.6% 15.2% 15.2% 10.1% 5.0% Negative Amortizing 0.0% 0.3% 3.1% 3.2% 1.9% Investor 7.2% 6.5% 4.6% 2.5% 5.6% 6.5% 7.0% 6.4% 5.4% Condo/Co-op 9.1% 8.8% 8.6% 8.2% 10.3% 10.4% 10.5% 9.8% 8.8% Refinance 79.4% 76.5% 77.4% 79.9% 58.6% 50.4% 48.3% 53.1% 57.3% Total Refi Plus Initiative (3) 24.5% 24.3% 23.4% 10.6% HARP 15.6% 9.9% 9.8% 4.1% Origination Loan-to-Value Ratio: >80% and <=105% 57.2% 88.1% 94.4% 99.1% >105% and <=125% 22.1% 11.9% 5.6% 0.9% >125% 20.7% HARP Weighted Average Origination Loan-to-Value Ratio 111.0% 94.3% 92.2% 90.7%
6 Credit Characteristics of Single-Family Business Acquisitions under the Refi Plus Initiative (1) Our Refi Plus initiative, under which we acquire HARP loans, started in April 2009. HARP loans have LTV ratios at origination in excess of 80%, while Other Refi-Plus loans have LTV ratios at origination of up to 80%. (2) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. 2012 2011 2010 2009 2012 2011 2010 2009 Unpaid Principal Balance (billions) $129.9 $55.6 $59.0 $27.9 $73.8 $81.2 $80.5 $44.7 Weighted Average Origination Note Rate 4.14% 4.78% 5.00% 5.05% 3.89% 4.44% 4.68% 4.85% Origination Loan-to-Value Ratio <= 80% 100.00% 100.00% 100.00% 100.00% >80% and <= 105% 57.2% 88.1% 94.4% 99.1% >105% and <= 125% 22.1% 11.9% 5.6% 0.9% >125% 20.7% Weighted Average Origination Loan-to-Value Ratio 111.0% 94.3% 92.2% 90.7% 61.1% 60.2% 62.3% 63.3% FICO Credit Scores (2) 0 to < 620 3.7% 2.1% 2.0% 1.2% 2.9% 1.7% 1.4% 0.8% >= 620 and < 660 6.0% 3.8% 3.6% 2.5% 4.2% 2.8% 2.4% 1.7% >=660 and < 700 13.4% 11.6% 11.6% 9.6% 9.8% 8.8% 8.0% 6.7% >=700 and < 740 20.3% 21.0% 21.4% 22.3% 16.2% 16.7% 15.9% 16.3% >=740 56.6% 61.5% 61.2% 64.4% 66.9% 70.0% 72.3% 74.5% Weighted Average FICO Credit Score 738 746 746 749 753 758 760 762 P oduct Distribution Fixed-rate 99.3% 96.8% 97.2% 97.9% 98.9% 97.6% 97.3% 98.1% Adjustable-rate 0.7% 3.2% 2.8% 2.1% 1.1% 2.4% 2.7% 1.9% Owner Occupied 85.7% 86.3% 91.1% 95.2% 87.2% 89.2% 91.8% 93.5% Second/Vacation Home 2.8% 3.6% 3.5% 3.3% 3.2% 3.6% 3.5% 4.2% Investor 11.5% 10.1% 5.4% 1.6% 9.6% 7.3% 4.7% 2.3% Condo/Co-op 10.9% 10.5% 10.1% 8.3% 7.6% 5.8% 6.0% 6.8% HARP (1) Other Refi Plus (1) Acquisition Year
7 (1) Loans with multiple product features are included in all applicable categories. The subtotal is calculated by counting a loan only once even if it is included in multiple categories. (2) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2012. (3) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae had access to loan level information. Includes primary mortgage insurance, pool insurance, lender recourse and other credit enhancement. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae’s 2012 Form 10-K. As of December 31, 2012 Negative Amortizing Loans Interest Only Loans Loans with FICO < 620(3) Loans with FICO ≥ 620 and < 660(3) Loans with Origination LTV Ratio > 90% Loans with FICO < 620 and Origination LTV Ratio > 90%(3) Alt-A Loans Subprime Loans Sub-total of Key Product Features(1) Overall Book Unpaid Principal Balance (billions) (2) $7.6 $103.4 $79.5 $166.5 $354.2 $19.4 $155.5 $5.0 $724.7 $2,757.2 Share of Single-Family Conventional Guaranty Book 0.3% 3.7% 2.9% 6.0% 12.8% 0.7% 5.6% 0.2% 26.3% 100.0% Average Unpaid Principal Balance (2) $105,071 $237,649 $119,373 $131,231 $166,546 $123,985 $155,094 $144,785 $153,689 $157,512 Serious Delinquency Rate 6.40% 14.30% 12.14% 9.22% 5.44% 14.76% 11.36% 20.60% 7.85% 3.29% Origination Years 2005-2008 54.5% 80.3% 54.6% 49.4% 25.0% 51.1% 67.1% 85.4% 42.6% 21.7% Weighted Average Origination Loan-to-Value Ratio 70.5% 74.4% 78.4% 78.0% 103.2% 102.5% 74.7% 77.0% 86.8% 73.0% Origination Loan-to-Value Ratio > 90% 0.3% 8.3% 24.4% 21.5% 100.0% 100.0% 9.1% 6.6% 48.9% 12.8% Weighted Average Mark-to-Market Loan-to-Value Ratio 89.5% 109.7% 88.3% 87.2% 106.5% 112.6% 95.7% 106.6% 96.4% 75.0% Mark-to-Market Loan-to-Value Ratio > 100% and <= 125% 14.9% 26.0% 17.6% 16.2% 28.8% 32.3% 19.8% 23.7% 22.2% 8.3% Mark-to-Market Loan-to-Value Ratio > 125% 27.5% 30.2% 12.9% 12.7% 16.8% 25.8% 20.0% 26.0% 15.2% 5.3% Weighted Average FICO (3) 707 725 586 642 724 588 715 619 699 742 FICO < 620 (3) 6.7% 1.5% 100.0% 5.5% 100.0% 1.3% 50.7% 11.0% 2.9% Fixed-rate 2.2% 27.9% 80.0% 82.4% 91.8% 81.0% 65.6% 64.0% 79.3% 90.1% Primary Residence 68.5% 85.1% 96.2% 93.7% 92.9% 97.5% 77.4% 96.9% 89.7% 88.8% Condo/Co-op 13.1% 15.8% 4.7% 6.4% 10.3% 5.7% 10.2% 4.1% 9.5% 9.4% Credit Enhanced (4) 54.4% 15.3% 27.0% 24.7% 60.0% 73.4% 14.8% 56.9% 34.9% 14.1% % of 2007 Credit Losses (5) 0.9% 15.0% 18.8% 21.9% 17.4% 6.4% 27.8% 1.0% 72.3% 100.0% % of 2008 Credit Losses (5) 2.9% 34.2% 11.8% 17.4% 21.3% 5.4% 45.6% 2.0% 81.3% 100.0% % of 2009 Credit Losses (5) 2.0% 32.6% 8.8% 15.5% 19.2% 3.4% 39.6% 1.5% 75.0% 100.0% % of 2010 Credit Losses (5) 1.9% 28.6% 8.0% 15.1% 15.9% 2.7% 33.2% 1.1% 68.4% 100.0% % of 2011 Credit Losses (5) 1.2% 25.8% 7.9% 14.7% 14.0% 2.2% 27.3% 0.6% 63.4% 100.0% % of 2012 Credit Losses (5) 0.5% 21.8% 7.8% 14.2% 16.8% 2.3% 23.7% 1.1% 61.2% 100.0% Categories Not Mutually Exclusive (1) Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Key Product Features
8 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year (1) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2012. (2) The increase after 2009 is the result of HARP loans, which we began acquiring in April 2009, and which involve the refinance of existing Fannie Mae loans that can have loan-to-value ratios in excess of 100%. (3) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. Includes primary mortgage insurance, pool insurance, lender recourse and other credit enhancement. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae’s 2012 Form 10-K. (6) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deeds in lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. For 2002 to 2004 cumulative default rates, refer to slide 16. As of December 31, 2012 Overall Book 2012 2011 2010 2009 2008 2007 2006 2005 2004 and Earlier Unpaid Principal Balance (billions) (1) $2,757.2 $717.7 $405.9 $375.5 $300.8 $124.7 $195.3 $138.0 $139.2 $360.0 Share of Single-Family Conventional Guaranty Book 100.0% 26.0% 14.7% 13.6% 10.9% 4.5% 7.1% 5.0% 5.0% 13.1% Average Unpaid Principal Balance (1) $157,512 $207,941 $185,520 $184,553 $177,580 $161,753 $167,726 $152,542 $136,803 $84,144 Serious Delinquency Rate 3.29% 0.04% 0.22% 0.48% 0.88% 6.63% 12.99% 12.15% 7.79% 3.61% Weighted Average Origination Loan-to-Value Ratio 73.0% 75.5% 70.9% 70.6% 69.3% 75.0% 78.4% 75.4% 73.4% 71.2% Origination Loan-to-Value Ratio > 90% (2) 12.8% 18.0% 11.8% 9.4% 5.9% 13.0% 21.1% 12.7% 9.7% 9.9% Weighted Average Mark-to-Market Loan-to-Value Ratio 75.0% 73.6% 67.4% 68.7% 70.4% 88.0% 106.9% 105.1% 89.8% 58.2% Mark-to-Market Loan-to-Value Ratio > 100% and <= 125% 8.3% 5.2% 2.6% 3.6% 4.5% 21.4% 27.0% 23.6% 18.2% 4.6% Mark-to-Market Loan-to-Value Ratio > 125% 5.3% 3.4% 0.1% 0.3% 0.3% 7.9% 24.9% 25.1% 13.6% 2.0% Weighted Average FICO (3) 742 760 759 759 756 723 699 702 711 712 FICO < 620 (3) 2.9% 0.9% 0.6% 0.6% 0.6% 4.4% 9.7% 7.8% 5.9% 6.5% Interest Only 3.7% 0.3% 0.6% 1.0% 1.0% 6.8% 16.7% 18.5% 11.8% 2.4% Negative Amortizing 0.3% 0.1% 1.3% 1.5% 1.0% Fixed-rate 90.1% 97.0% 93.9% 94.9% 97.1% 82.7% 73.6% 72.1% 74.7% 85.3% Primary Residence 88.8% 88.8% 87.6% 89.8% 91.1% 86.4% 88.3% 86.4% 86.5% 90.1% Condo/Co-op 9.4% 9.1% 9.0% 8.8% 9.2% 12.1% 10.9% 11.5% 11.0% 8.0% Credit Enhanced (4) 14.1% 14.4% 10.6% 7.7% 7.4% 27.5% 31.4% 21.0% 16.2% 12.0% % of 2007 Credit Losses (5) 100.0% 1.9% 21.3% 23.6% 53.2% % of 2008 Credit Losses (5) 100.0% 0.5% 27.9% 34.9% 19.3% 17.3% % of 2009 Credit Losses (5) 100.0% 4.8% 36.0% 30.9% 16.4% 11.9% % of 2010 Credit Losses (5) 100.0% 0.4% 7.0% 35.8% 29.2% 15.9% 11.7% % of 2011 Credit Losses (5) 100.0% 0.7% 1.6% 5.7% 30.3% 27.7% 19.2% 14.8% % of 2012 Credit Losses (5) 100.0% 0.1% 0.6% 1.9% 2.5% 7.7% 31.5% 26.3% 16.3% 13.1% Cumulative Default Rate (6) 0.0% 0.1% 0.2% 0.4% 3.4% 11.1% 10.3% 6.2% Origination Year
9 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by State (1) Select Midwest states are Illinois, Indiana, Michigan, and Ohio. (2) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2012. (3) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. Includes primary mortgage insurance, pool insurance, lender recourse and other credit enhancement. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae’s 2012 Form 10-K. As of December 31, 2012 Overall Book AZ CA FL NV Select Midwest States (1) Unpaid Principal Balance (billions) (2) $2,757.2 $65.3 $523.6 $165.4 $27.2 $278.5 Share of Single-Family Conventional Guaranty Book 100.0% 2.4% 19.0% 6.0% 1.0% 10.1% Average Unpaid Principal Balance (2) $157,512 $148,075 $222,360 $138,309 $155,971 $122,927 Serious Delinquency Rate 3.29% 2.14% 1.69% 10.06% 6.70% 3.51% Origination Years 2005-2008 21.7% 28.8% 17.5% 41.1% 37.0% 20.5% Weighted Average Origination Loan-to-Value Ratio 73.0% 80.9% 67.4% 77.7% 83.7% 77.0% Origination Loan-to-Value Ratio > 90% 12.8% 21.6% 8.3% 17.1% 20.4% 17.4% Weighted Average Mark-to-Market Loan-to-Value Ratio 75.0% 87.7% 72.9% 96.2% 116.7% 81.4% Mark-to-Market Loan-to-Value Ratio >100% and <=125% 8.3% 16.2% 7.8% 15.8% 14.0% 12.4% Mark-to-Market Loan-to-Value Ratio >125% 5.3% 14.5% 7.5% 23.4% 39.1% 6.4% Weighted Average FICO (3) 742 743 751 728 737 737 FICO < 620 (3) 2.9% 2.4% 1.6% 4.6% 2.5% 3.8% Interest Only 3.7% 7.1% 5.4% 7.4% 11.0% 2.4% Negative Amortizing 0.3% 0.3% 0.8% 0.7% 0.9% 0.1% Fixed-rate 90.1% 85.8% 87.9% 84.1% 79.5% 89.8% Primary Residence 88.8% 79.9% 86.0% 81.9% 76.9% 92.9% Condo/Co-op 9.4% 4.3% 12.2% 13.6% 5.6% 11.1% Credit Enhanced (4) 14.1% 13.6% 6.5% 14.4% 13.4% 17.8% % of 2007 Credit Losses (5) 100.0% 1.8% 7.2% 4.7% 1.2% 46.6% % of 2008 Credit Losses (5) 100.0% 8.0% 25.2% 10.9% 4.9% 21.1% % of 2009 Credit Losses (5) 100.0% 10.8% 24.4% 15.5% 6.5% 14.8% % of 2010 Credit Losses (5) 100.0% 10.0% 22.6% 17.5% 6.1% 13.6% % of 2011 Credit Losses (5) 100.0% 11.7% 27.0% 11.0% 7.9% 12.0% % of 2012 Credit Losses (5) 100.0% 6.3% 18.4% 21.4% 4.8% 18.7%
10 Credit Characteristics Single-Family Conventional Guaranty Book of Business of Alt-A by Origination Year (1) In reporting our Alt-A exposure, we have classified mortgage loans as Alt-A if and only if the lenders that deliver the mortgage loans to us have classified the loans as Alt-A based on documentation or other product features. We have loans with some features that are similar to Alt-A mortgage loans that we have not classified as Alt-A because they do not meet our classification criteria. (2) Newly originated Alt-A loans acquired after 2008 consist of the refinance of existing loans under our Refi Plus initiative. (3) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2012. (4) The increase after 2008 is the result of our Refi Plus loans, which we began acquiring in April 2009 and which involve the refinance of existing Fannie Mae loans that can have loan-to- value ratios in excess of 100%. (5) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. (6) Defined as unpaid principal balance of Alt-A loans with credit enhancement as a percentage of unpaid principal balance of all Alt-A loans. At December 31, 2012, 9.4% of unpaid principal balance of Alt-A loans carried only primary mortgage insurance (no deductible), 4.2% had only pool insurance (which is generally subject to a deductible), 0.8% had primary mortgage insurance and pool insurance, and 0.4% carried other credit enhancement such as lender recourse. (7) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae’s 2012 Form 10-K. (8) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and includes loan foreclosures, short sales, sales to third parties and deeds in lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. As of December 31, 2012 Alt-A (1) 2012(2) 2011 (2) 2010 (2) 2009 (2) 2008 2007 2006 2005 2004 and Earlier Unpaid principal balance (billions) (3) $155.5 $6.5 $6.6 $3.7 $1.3 $3.5 $35.9 $38.2 $26.7 $33.0 Share of Alt-A 100.0% 4.2% 4.3% 2.4% 0.8% 2.3% 23.1% 24.6% 17.2% 21.2% Weighted Average Origination Loan-to-Value Ratio 74.7% 99.1% 74.5% 79.5% 75.8% 68.6% 75.1% 74.3% 73.0% 71.5% Origination Loan-to-Value Ratio > 90% (4) 9.1% 53.7% 25.3% 29.2% 21.6% 2.6% 8.5% 4.9% 3.4% 5.1% Weighted Average Mark-to-Market Loan-to-Value Ratio 95.7% 96.8% 71.8% 80.2% 79.6% 85.0% 111.3% 111.6% 98.4% 66.1% Mark-to-Market Loan-to-Value Ratio > 100% and <=125% 19.8% 20.7% 10.3% 14.5% 15.6% 18.5% 26.6% 24.9% 21.5% 7.5% Mark-to-Market Loan-to-Value Ratio > 125% 20.0% 19.4% 0.5% 0.7% 1.3% 8.0% 30.0% 31.2% 20.3% 4.0% Weighted Average FICO (5) 715 721 742 732 733 722 708 710 720 716 FICO < 620 (5) 1.3% 7.4% 2.9% 3.4% 3.9% 0.3% 0.6% 0.6% 0.5% 1.6% Adjustable-rate 34.4% 0.8% 2.6% 4.3% 3.7% 24.6% 37.0% 41.6% 46.7% 32.0% Interest Only 26.6% 0.1% 7.4% 37.4% 38.0% 30.8% 15.0% Negative Amortizing 2.6% 3.9% 6.1% 2.5% Investor 18.2% 28.8% 24.2% 12.3% 5.4% 18.6% 18.5% 16.3% 19.6% 16.6% Condo/Co-op 10.2% 10.9% 7.2% 9.3% 8.8% 6.7% 8.9% 10.9% 12.8% 9.8% California 20.9% 24.1% 26.1% 19.1% 14.9% 20.0% 20.8% 18.3% 19.6% 23.8% Florida 11.7% 10.9% 4.0% 3.5% 3.4% 9.7% 13.1% 13.9% 13.6% 9.3% Credit Enhanced (6) 14.8% 7.8% 2.2% 2.3% 1.5% 13.9% 16.4% 15.0% 14.3% 19.2% Serious Delinquency Rate at 12/31/11 12.43% -- 0.21% 2.11% 4.25% 10.70% 18.46% 17.55% 12.19% 6.65% Serious Delinquency Rate at 12/31/12 11.36% 0.21% 1.05% 3.30% 4.89% 10.71% 17.41% 16.59% 11.76% 6.74% % of 2007 Credit Losses (7) 27.8% 0.7% 9.8% 9.7% 7.7% % of 2008 Credit Losses (7) 45.6% 0.0% 12.4% 20.1% 9.7% 3.4% % of 2009 Credit Losses (7) 39.6% 0.4% 13.4% 15.8% 7.3% 2.6% % of 2010 Credit Losses (7) 33.2% 0.0% 0.0% 0.5% 11.8% 12.8% 5.7% 2.3% % of 2011 Credit Losses (7) 27.3% 0.1% 0.1% 0.3% 8.5% 10.1% 5.9% 2.5% % of 2012 Credit Losses (7) 23.7% 0.0% 0.0% 0.1% 0.1% 0.3% 7.9% 8.9% 4.3% 1.9% Cumulative Default Rate (8) 0.0% 0.2% 1.9% 3.0% 8.8% 20.3% 18.9% 12.1%
11 Credit Characteristics of Single-Family Conventional Guaranty Book of Business under the Refi Plus Initiative (1) Our Refi Plus initiative, under which we acquire HARP loans, started in April 2009. HARP loans have LTV ratios at origination in excess of 80%, while Other Refi Plus loans have LTV ratios at origination of up to 80%. (2) FICO credit scores as reported by the seller of the mortgage loan at the time of delivery. 2012 2011 2010 2009 2012 2011 2010 2009 Unpaid Principal Balance (billions) $119.8 $51.3 $50.1 $24.2 $64.1 $64.8 $56.1 $25.8 Share of Single-Family Conventional Guaranty Book 4.3% 1.9% 1.8% 0.9% 2.3% 2.4% 2.0% 0.9% Average Unpaid Principal Balance $199,811 $209,065 $222,464 $229,861 $149,657 $155,043 $166,759 $170,607 Share of Total Refinances 6.0% 2.6% 2.5% 1.2% 3.2% 3.3% 2.8% 1.3% Weighted Average Origination Loan-to-Value Ratio 112.2% 94.7% 92.8% 91.3% 61.2% 60.5% 62.8% 64.8% Origination Loan-to-Value Ratio > 90% 77.5% 57.8% 52.5% 47.8% Weighted Average Mark-to-Market Loan-to-Value Ratio 108.9% 91.3% 93.2% 95.9% 59.5% 57.3% 60.7% 65.3% Weighted Average FICO (2) 738 745 744 746 751 756 757 755 FICO < 620 (2) 3.8% 2.2% 2.1% 1.5% 3.1% 1.9% 1.6% 1.4% Fixed-rate 99.4% 97.0% 97.4% 97.7% 99.0% 97.6% 97.5% 98.0% Primary Residence 85.4% 86.1% 90.5% 94.6% 86.9% 88.4% 90.8% 92.2% Second/Vacation Home 2.8% 3.5% 3.5% 3.2% 3.2% 3.6% 3.6% 4.6% Investor 11.8% 10.5% 6.1% 2.1% 9.9% 8.0% 5.6% 3.2% Condo/Co-op 11.0% 10.5% 10.1% 8.5% 7.8% 5.9% 6.2% 7.4% Serious Delinquency Rate Overall Serious Delinquency Rate 0.13% 0.99% 2.02% 3.02% 0.04% 0.24% 0.53% 0.98% Serious Delinquency Rate by MTMLTV Ratio: <=80% 0.08% 0.28% 0.44% 0.58% 0.04% 0.22% 0.42% 0.70% 80% and <=105% 0.10% 0.98% 1.77% 2.44% 0.18% 1.21% 1.93% 2.41% 105% and <=125% 0.15% 2.01% 4.35% 5.80% 3.57% 4.61% 3.86% >125% 0.21% 2.94% 6.62% 8.89% 10.00% 6.90% 7.29% Mark-to-Market Loan-to-Value Ratio <=80% 4.1% 14.4% 10.9% 7.7% 98.8% 97.6% 91.1% 80.1% 80% and <=105% 53.7% 73.2% 74.1% 71.8% 1.2% 2.4% 8.8% 19.6% 105% and <=125% 21.8% 11.5% 13.3% 18.4% 0.0% 0.0% 0.0% 0.3% >125% 20.4% 0.9% 1.7% 2.2% 0.0% 0.0% 0.1% HARP (1) Other Refi Plus (1) As of December 31, 2012 Origination Year
12 Serious Delinquency Rates of Single-Family Conventional Guaranty Book of Business(1) by State and Region (1) Calculated based on the number of loans in Fannie Mae’s single-family conventional guaranty book of business within each specified category. (2) Select Midwest states are Illinois, Indiana, Michigan, and Ohio. (3) For information on which states are included in each region, refer to footnote 9 to Table 41 in Fannie Mae’s 2012 Form 10-K. 0% 1% 2% 3% 4% 5% 6% 7% 8% 2012 Q42012 Q32012 Q22012 Q12011 Q42011 Q32011 Q22011 Q12010 Q42010 Q32010 Q22010 Q12009 Q4 Serious Delinquency Rate by Region (3) Midwest Northeast Southeast Southwest West 0% 2% 4% 6% 8% 10% 12% 14% 16% 2012 Q42012 Q32012 Q22012 Q12011 Q42011 Q32011 Q22011 Q12010 Q42010 Q32010 Q22010 Q12009 Q4 Serious Delinquency Rate by States AZ CA FL NV Select Midwest States All (2)
13 Single-Family Completed Workouts by Type Modifications involve changes to the original mortgage loan terms, which may include a change to the product type, interest rate, amortization term, maturity date and/or unpaid principal balance. Modifications include both completed modifications under the Administration’s Home Affordable Modification Program (HAMP) and completed non-HAMP modifications, and do not reflect loans currently in trial modifications. Repayment plans involve plans to repay past due principal and interest over a reasonable period of time through temporarily higher monthly payments. Loans with completed repayment plans are included for loans that were at least 60 days delinquent at initiation. Forbearances involve an agreement to suspend or reduce borrower payments for a period of time. Loans with forbearance plans are included for loans that were at least 90 days delinquent at initiation. Deeds-in-lieu of foreclosure involve the borrower’s voluntarily signing over title to the property. In a short sale, the borrower, working with the servicer, sells the home prior to foreclosure to pay off all or part of the outstanding loan, accrued interest and other expenses from the sale proceeds. 82,684 77,748 65,239 69,258 63,228 0 25,000 50,000 75,000 100,000 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 Nu mb er o f Lo an s Modifications Repayment Plans and Forbearances Completed Short Sales and Deeds-in-Lieu
14 Single-Family Loan Modifications by Monthly Payment Change and Type Change in Monthly Principal and Interest Payment of Modified Single-Family Loans(1)(2) (1) Excludes loans that were classified as subprime adjustable rate mortgages that were modified into fixed rate mortgages and were current at the time of modification. Modifications include permanent modifications, but do not reflect loans currently in trial modifications. (2) Represents the change in the monthly principal and interest payment at the effective date of the modification. The monthly principal and interest payment on modified loans may vary, and may increase, during the remaining life of the loan. Modification Type of Single-Family Loans(1)(2) 0% 20% 40% 60% 80% 100% Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Decrease of greater than 30% of Principal and Interest Payment Decrease of greater than 20% but less than or equal to 30% of Principal and Interest Payment Decrease of ess than or equal to 20% of Principal and Interest Payment No Change in Principal and Interest Payment Increase in Principal and Interest Payment 0% 20% 40% 60% 80% 100% Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Capitalization of Missed Payments and Other Extend Term, Reduce Rate and Forbear Principal Extend Term and Reduce Rate Extend Term Only Reduce Rate Only
15 Re-performance Rates of Modified Single-Family Loans(1) (1) Excludes loans that were classified as subprime adjustable rate mortgages that were modified into fixed rate mortgages. Modifications include permanent modifications, but do not reflect loans currently in trial modifications. 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 3 Months post modification 80% 79% 78% 81% 84% 84% 83% 84% 85% 84% 84% 6 months post modification 71% 73% 75% 77% 78% 79% 79% 79% 78% 77% n/a 9 months post modification 65% 71% 73% 72% 75% 77% 76% 74% 73% n/a n/a 12 Months post modification 65% 70% 70% 69% 74% 75% 72% 71% n/a n/a n/a 15 months post modification 63% 66% 67% 68% 73% 72% 70% n/a n/a n/a n/a 18 Months post modification 60% 65% 67% 68% 71% 71% n/a n/a n/a n/a n/a 21 Months post modification 59% 65% 67% 66% 70% n/a n/a n/a n/a n/a n/a 24 Months post modification 60% 65% 65% 65% n/a n/a n/a n/a n/a n/a n/a % Current or Paid Off
16 Note: Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deeds-in-lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. Data as of December 31, 2012 are not necessarily indicative of the ultimate performance of the loans and performance is likely to change, perhaps materially, in future periods. Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year 20022003 2004 2005 2006 2007 2008 2009201020112012 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% 11.5% 12.0% Yr1-Q1 Yr2-Q1 Yr3-Q1 Yr4-Q1 Yr5-Q1 Yr6-Q1 Yr7-Q1 Yr8-Q1 Yr9-Q1 Yr10-Q1 Yr11-Q1 Cu mu lat ive De fau lt R ate Time Since Beginning of Origination Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
17 Single-Family Real Estate Owned (REO) in Selected States (1) Select Midwest States are Illinois, Indiana, Michigan, and Ohio. (2) Measured from the last monthly period for which the borrowers fully paid their mortgages to when the related properties were added to our REO inventory for foreclosures completed during full year 2012. (3) Fannie Mae incurs additional costs associated with property taxes, hazard insurance, and legal fees while a delinquent loan remains in the foreclosure process. Additionally, the longer a loan remains in the foreclosure process, the longer it remains in our guaranty book of business as a seriously delinquent loan. The average number of days from last paid installment to foreclosure for all states combined were 327, 325, 407, 479, 529, and 655 in each of the years 2007 through 2012, respectively. (4) Home Equity Conversion Mortgage (HECMs) excluded from calculation. 2012 2011 2010 2009 2008 2007 Beginning Balance N/A 118,528 162,489 86,155 63,538 33,729 25,125 N/A N/A Arizona 394 8,133 16,172 20,691 12,854 5,532 751 3,497 4,385 California 516 14,980 27,589 34,051 19,565 10,624 1,681 8,909 14,147 Florida 1,062 23,586 13,748 29,628 13,282 6,159 1,714 13,838 8,677 Nevada 612 3,014 8,406 9,418 6,075 2,906 530 1,379 2,833 Select Midwest States (1) 688 40,070 33,777 45,411 28,464 23,668 16,678 29,148 29,614 All other States 574 84,696 100,004 122,879 65,377 45,763 27,767 48,895 58,872 Total Acquisitions N/A 174,479 199,696 262,078 145,617 94,652 49,121 N/A N/A Total Dispositions N/A (187,341) (243,657) (185,744) (123,000) (64,843) (40,517) N/A N/A Ending Inventory N/A 105,666 118,528 162,489 86,155 63,538 33,729 N/A N/A State REO Inventory as of December 31, 2012 REO Inventory as of December 31, 2011 REO Acquisitions and Dispositions (Number of Properties) Average Days From Last Paid Installment to Foreclosure For Full Year 2012 (2) (3) (4)
18 Single-Family Real Estate Owned (REO) Sales Price / UPB of Mortgage Loans(1) Net Sales Proceeds/UPB Trends on Direct Sale Dispositions(1) Top 10 States (Based on 2012 Volume of REO Properties Sold) (1) Calculated as the sum of sale proceeds received on REO properties that have been sold to a third party, excluding properties repurchased by the seller/servicer, acquired by a mortgage insurance company, redeemed by a borrower, and properties sold through the FHFA Rental Pilot, divided by the aggregate unpaid principal balance (UPB) of the related loans. Gross sales price represents the contract sale price. Net Sales Price represents the contract sale price less selling costs for the property and adjusted for other charges/credits paid by or due to the seller at closing. Note: Properties disposed of in the third and fourth quarters of 2012 through structured rental transactions have been excluded from the Net/Gross Proceeds to UPB calculations. 62% 59% 60% 62% 61% 64% 62% 61% 59% 60% 60% 61% 62% 65% 67% 68% 55% 52% 53% 55% 55% 57% 56% 54% 53% 54% 54% 55% 56% 59% 61% 62% 50% 55% 60% 65% 70% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 2012 Gross Sales/ UPB Net Sales/ UPB Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 CA 51.7% 47.8% 49.3% 52.9% 53.7% 56.2% 55.9% 53.3% 53.1% 53.5% 53.1% 54.7% 55.4% 58.8% 63.2% 67.6% FL 45.6% 41.6% 41.3% 42.6% 41.8% 43.2% 42.0% 41.7% 41.3% 43.8% 44.7% 46.3% 47.6% 51.0% 53.3% 55.8% MI 41.6% 41.9% 42.0% 4.8% 41.2% 4.5% 43.3% 44.5% 41.6% 42.6% 44.0% 45.1% 46.3% 49.2% 51.8% 51.9% GA 53.3% 52.6% 54.4% 57.3% 56.0% 58.8% 56.7% 54.9% 54.3% 54.9% 53.7% 54.0% 54.2% 57.3% 60.0% 63.2% IL 52.2% 47.9% 44. % 42.9% 43.9% 45.8% 41.4% 39.3% 39.2% 43.3% 42.2% 42.0% 41.1% 44.3% 45.9% 47.7% OH 46.2% 50.4% 51.8% 50.8% 49.0% 52.9% 47.5% 49.6% 45.2% 49.3% 47.2% 47.1% 46.3% 49.9% 53.7% 52.5% AZ 51.5% 47.8% 50.1% 52.1% 50.6% 52.1% 51.0% 46.2% 45.0% 47.0% 48.6% 51.7% 54.5% 60.9% 65.3% 67.5% TX 71.6% 70.3% 72.7% 73.8% 75.5% 77.9% 74.7% 71.4% 73.8% 74.2% 74.4% 73.5% 76.2% 78.9% 78.2% 79.8% NC 68.0% 67.0% 71.9% 72.9% 69.8% 71.5% 66.1% 65.9% 66.1% 67.5% 64.6% 65.6% 66.1% 68.2% 68.6% 71.0% IN 48.5% 49.5% 51.7% 53.1% 48.0% 53.5% 50.0% 51.6% 52.0% 56.2% 54.8% 53.5% 53.1% 56.5% 57.6% 57.3% Top 10 51.2% 48.5% 49.5% 51.6% 50.9% 53.5% 52.0% 50.9% 49.4% 51.1% 51.4% 52.8% 53.3% 56.4% 59.0% 60.8% All Others 62.0% 60.3% 61.1% 62.4% 62.1% 64.0% 61.8% 59.5% 58.9% 59.6% 58.5% 59.2% 60.5% 63.4% 64.6% 65.0% Total 55.1% 52.4% 53.4% 55.3% 55.0% 57.3% 55.6% 54.1% 52.8% 54.1% 54.0% 55.4% 56.3% 59.2% 61.1% 62.3% 2011 20122009 2010
19 Multifamily Credit Profile by Loan Attributes (1) We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. (2) Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral. (3) Weighted Average Origination loan-to-value ratio is 66% as of December 31, 2012. (4) Under the Delegated Underwriting and Servicing, or DUS ®, product line, Fannie Mae acquires individual, newly originated mortgages from specially approved DUS lenders using DUS underwriting standards and/or DUS loan documents. Because DUS lenders generally share the risk of loss with Fannie Mae, they are able to originate, underwrite, close and service most loans without our pre-review. (5) Multifamily loans under $3 million and up to $5 million in high cost of living areas. Total Multifamily Guaranty Book of Business (2) 38,881 $204.1 100% 0.24% 100% 100% 100% Credit Enhanced Loans: Credit Enhanced 34,939 $184.2 90% 0.22% 73% 83% 68% Non-Credit Enhanced 3,942 $20.0 10% 0.42% 27% 17% 32% Origination loan-to-value ratio:(3) Less than or equal to 70% 25,037 $114.6 56% 0.10% 14% 18% 8% Greater than 70% and less than or equal to 80% 11,125 $82.0 40% 0.43% 71% 70% 89% Greater than 80% 2,719 $7.5 4% 0.36% 15% 12% 3% Delegated Underwriting and Servicing (DUS ®) Loans:(4) DUS ® - Small Balance Loans(5) 8,568 $16.4 8% 0.32% 7% 9% 7% DUS ® - Non Small Balance Loans 12,100 $154.5 76% 0.17% 71% 72% 61% DUS ® - Total 20,668 $170.9 84% 0.18% 78% 81% 68% Non-DUS - Small Balance Loans(5) 17,130 $14.0 7% 1.02% 16% 12% 10% Non-DUS - Non Small Balance Loans 1,083 $19.2 9% 0.21% 6% 7% 22% Non-DUS - Total 18,213 $33.3 16% 0.55% 22% 19% 32% Maturity Dates: Loans maturing in 2013 2,215 $12.5 6% 0.27% 2% 7% 10% Loans maturing in 2014 2,286 $14.3 7% 0.31% 12% 5% 11% Loans maturing in 2015 2,960 $15.2 7% 0.29% 8% 6% 4% Loans maturing in 2016 2,952 $15.4 8% 0.47% 12% 8% 14% Loans maturing in 2017 4,108 $21.7 11% 0.34% Other maturities 24,360 $125.1 61% 0.18% 67% 75% 60% Loan Size Distribution: Less than or equal to $750K 10,555 $3.2 2% 0.99% 5% 5% 2% Greater than $750K and less than or equal to $3M 13,767 $20.5 10% 0.74% 17% 16% 16% Greater than $3M and less than or equal to $5M 4,798 $17.5 9% 0.29% 12% 11% 17% Greater than $5M and less than or equal to $25M 8,510 $86.9 43% 0.30% 55% 50% 48% Greater than $25M 1,251 $76.0 37% 11% 18% 17% % of 2010 Multifamily Credit Losses % of 2011 Multifamily Credit Losses % of 2012 Multifamily Credit Losses As of December 31, 2012 Unpaid Principal Balance (Billions) % of Multifamily Guaranty Book of Business (UPB) % Seriously Delinquent (1) Loan Counts
20 (1) We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. (2) Negative values are the result of recoveries on previously charged-off amounts. (3) Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral. Multifamily Credit Profile by Acquisition Year Multifamily SDQ Rate by Acquisition Year Cumulative Defaults by Acquisition Year 2010 2009 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Cu m ula tiv e De fa ult R at e 2005 2006 2007 2008 2009 2010 2011 2012 2005 2007 2008 2006 2012 2011 2005 2006 2007 2008 2009 2011 20102012 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 SD Q (% ) 2005 2006 2007 2008 2009 2010 2011 2012 As of December 31, 2012 Unpaid Principal Balance (Billions) % of Multifamily Guaranty Book of Business (UPB) % Seriously Delinquent (1) # of Seriously Delinquent loans (1) % of 2012 Multifamily Credit Losses (2) % of 2011 Multifamily Credit Losses % of 2010 Multifamily Credit Losses Total Multifamily Gu ranty Book of Business (3) $204.1 100% 0.24% 226 100% 100% 100% By Acquisition Year: 2012 $33.8 17% 2011 $23.6 12% 0.01% 1 0% 2010 $16.9 8% 0% 2009 $17.1 8% 0.26% 6 7% 6% 2% 2008 $27.0 13% 0.36% 66 23% 31% 17% 2007 $34.0 17% 0.46% 82 48% 33% 38% 2006 $15.6 8% 0.51% 18 10% 7% 17% 2005 $12.8 6% 0.17% 13 17% 3% 2% Prior to 2005 $23.3 11% 0.41% 40 -4% 20% 25%
21 Multifamily Credit Profile (1) We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. (2) Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral. (3) For information on which states are included in each region, refer to Fannie Mae’s 2012 Form 10-K. (4) Asset Class Definitions: Conventional/Co-Op Housing: Privately owned multifamily properties or multifamily properties in which the residents collectively own the property through their shares in the cooperative corporation. Seniors Housing: Multifamily rental properties for senior citizens. Manufactured Housing: A residential real estate development consisting of housing sites for manufactured homes, related amenities, utility services, landscaping, roads and other infrastructure. Student Housing: Multifamily rental properties in which 80% or more of the units are leased to undergraduate and/or graduate students. (5) The Multifamily Affordable Business Channel focuses on financing properties which are under a regulatory agreement that provides long-term affordability, such as properties with rent subsidies or income restrictions. Total Multifamily Guaranty Book of Business (2) $204.1 100% 0.24% 100% 100% 100% Region: (3) Midwest $17.1 8% 0.43% 15% 23% 10% Northeast $43.5 21% 0.32% 10% 3% 5% Southeast $42.4 21% 0.26% 53% 42% 40% Southwest $36.0 18% 0.20% 8% 26% 40% Western $65.1 32% 0.15% 14% 6% 6% Top Five States by UPB: California $50.9 25% 0.07% 1% 1% 2% New York $25.8 13% 0.18% 3% 0% 1% Texas $18.0 9% 0.19% 2% 19% 12% Florida $10.4 5% 0.41% 36% 10% 13% Virginia $7.9 4% 0.10% 0% 0% 0% Asset Class: (4) Conventional/Co-op $181.5 89% 0.27% 94% 96% 99% Seniors Housing $14.4 7% 0.09% Manufactured Housing $5.3 3% 0.01% 3% 0% 0% Student Housing $2.9 1% 0.03% 3% 4% 1% Targeted Affordable Segment: Privately Owned with Subsidy (5) $28.9 14% 0.16% 3% 14% 6% DUS & Non-DUS Lenders/Servicers: DUS: Bank (Direct, Owned Entity, or Subsidiary) $77.0 38% 0.19% 21% 29% 45% DUS: Non-Bank Financial Institution $112.9 55% 0.24% 70% 68% 50% Non-DUS: Bank (Direct, Owned Entity, or Subsidiary) $12.9 6% 0.61% 6% 1% 4% Non-DUS: Non-Bank Financial Institution $1.2 1% 0.14% 2% 1% 1% Non-DUS: Public Agency/Non Profit $0.2 0% 0% 0% 0% % of 2010 Multifamily Credit Losses As of December 31, 2012 % of Multifamily Guaranty Book of Business (UPB) % Seriously Delinquent (1) % of 2011 Multifamily Credit Losses Unpaid Principal Balance (Billions) % of 2012 Multifamily Credit Losses
22 Example: UPB in NY is $25.8B and 2012 Credit Losses are $7M Numbers: Represent 2012 credit losses for each state which total $257M as of December 31, 2012. States with no numbers had less than $500K in credit related income in 2012. Shading: Represent Unpaid Principal Balance (UPB) for each state which total $204.1B as of December 31, 2012. (1) Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral. (2) Negative values are the result of recoveries on previously charged-off amounts. Portfolio UPB(1) Concentration by State as of 12/31/2012 Multifamily 2012 Credit Losses(1) by State ($ Millions)